Amazon is yet to enter India with its full force, but the ramifications of the impending launch are already being felt. Flipkart, which refused to let itself be acquired by Amazon, has made the aggressive move of acquiring LetsBuy.com – its biggest competitor.
Medianama is reporting that Flipkart paid anywhere between $20 million and $25 million for LetsBuy, which is the second largest online retailer in India. Flipkart, which reportedly raised $150 million at a valuation of around $850 million, is the undisputed leader. It sells almost twenty products every minute, and is expected to cross the $100 million revenue mark during the financial year 2011-12.
Flipkart is no stranger to acquisitions, having earlier acquired WeRead, Mime360, and Chakpak.com. However, none of its previous acquisitions were competitors. Instead, they were platforms and technologies that Flipkart believed would help in improving its core product.
At this point it will be prudent to take this news with a pinch of salt, since neither of the involved parties have confirmed it. However, if Medianama is spot on, then by acquiring LetsBuy, Flipkart is formally flagging off the consolidation phase that analysts have been predicting for a long time. Although, online shopping is rapidly gaining traction in India, the entry of a behemoth like Amazon will undoubtedly send shockwaves throughout the industry as smaller players will be hard-pressed to compete with Amazon’s inventory and pricing. LetsBuy, which is well known for its extremely aggressive pricing, will undoubtedly help Flipkart scale better. Although, it is possible that the acquisition will hurt consumers in the immediate future by reducing competition, it will probably turn out to be a good thing in the long run. The consolidation of the two biggest online retailers will enable the resultant entity to offer a more spirited challenge to the big names that will almost surely make an entry in the Indian ecommerce segment within the next couple of years.
Update: Sachin Bansal, the CEO and Co-Founder of Flipkart, has confirmed that “the rumors are true”.