Amazon's Barriers to Entry in India, Middle East & China
It's been fascinating in the last few months to see how valuations for e-commerce sites have shot through the roof not only in developed markets like the United States and Europe but across emerging markets like India, the Middle East and China.
In India, we keep hearing about Flipkart, which this week raised US$ 210,000,000 after an investment vehicle owned Russian investor Yuri Milner reaffirmed their faith in India's burgeoning e-commerce market. As Flipkart's CEO said in this Financial Times article, it is a "vote of confidence" as Milner was an early investor in Facebook, Twitter and Spotify. We also heard this week of a merger in India between Flipkart and fashion e-tailer Myntra.
In the Middle East, Souq.com has probably ruled the roost as far as headlines and funding has gone. They are the largest e-commerce site based in the region and recently received US$ 75,000,000 in funding from South African investment house, Naspers (read more about it here). Souq have invested in creating local logistics, warehousing, procurement and payment gateways across most of the Middle East and a few years ago, Souq swallowed up it's sister concern, fashion e-tailer, Sukar.com (again, you can read about this here).
China is another market that has taken a fair share of the headlines in the e-commerce space. Names like Alibaba and Tencent are becoming more familiar outside of China and stories of the success that smartphone manufacturer Xiaomi have had with their online go to market route have had their fair share of coverage in the international press. I don't know whether it is true to say that Alibaba has grabbed 80% of the e-commerce market in China as one headline claimed, but it is fair to say, the local e-commerce brands have prospered.
Which brings me back to the point raised in my headline. Amazon has been the incumbent behemoth of the e-commerce trade. We've heard and read about e-commerce crossing borders. We've been told we're in a global marketplace. However, for Amazon to say they want to grow, they need to be in markets like India, China and the Middle East in the long term. At the moment, the only way for them to be anything more than a bit player is to make a significant acquisition in each of these regions as these are not easy markets to do business in and they're a little late to the party. It can be argued that none of these e-commerce players other than Amazon are truly profitable but you get a sense they are all holding in for long term.
Amazon has received a fair amount of heat this week for their predatory practices when they made it difficult to pre-order J.K. Rowling's new book due to a dispute with the publisher, but this is just a sign of things to come. There seems to be no shortage of cash from investors at this stage and if we are to see a Walmart-type effect in the online arena, Amazon will probably have to dig deep, pay out to buy their piece of the action and then we could start to see the real predator in action.
In India, we keep hearing about Flipkart, which this week raised US$ 210,000,000 after an investment vehicle owned Russian investor Yuri Milner reaffirmed their faith in India's burgeoning e-commerce market. As Flipkart's CEO said in this Financial Times article, it is a "vote of confidence" as Milner was an early investor in Facebook, Twitter and Spotify. We also heard this week of a merger in India between Flipkart and fashion e-tailer Myntra.
In the Middle East, Souq.com has probably ruled the roost as far as headlines and funding has gone. They are the largest e-commerce site based in the region and recently received US$ 75,000,000 in funding from South African investment house, Naspers (read more about it here). Souq have invested in creating local logistics, warehousing, procurement and payment gateways across most of the Middle East and a few years ago, Souq swallowed up it's sister concern, fashion e-tailer, Sukar.com (again, you can read about this here).
China is another market that has taken a fair share of the headlines in the e-commerce space. Names like Alibaba and Tencent are becoming more familiar outside of China and stories of the success that smartphone manufacturer Xiaomi have had with their online go to market route have had their fair share of coverage in the international press. I don't know whether it is true to say that Alibaba has grabbed 80% of the e-commerce market in China as one headline claimed, but it is fair to say, the local e-commerce brands have prospered.
Which brings me back to the point raised in my headline. Amazon has been the incumbent behemoth of the e-commerce trade. We've heard and read about e-commerce crossing borders. We've been told we're in a global marketplace. However, for Amazon to say they want to grow, they need to be in markets like India, China and the Middle East in the long term. At the moment, the only way for them to be anything more than a bit player is to make a significant acquisition in each of these regions as these are not easy markets to do business in and they're a little late to the party. It can be argued that none of these e-commerce players other than Amazon are truly profitable but you get a sense they are all holding in for long term.
Amazon has received a fair amount of heat this week for their predatory practices when they made it difficult to pre-order J.K. Rowling's new book due to a dispute with the publisher, but this is just a sign of things to come. There seems to be no shortage of cash from investors at this stage and if we are to see a Walmart-type effect in the online arena, Amazon will probably have to dig deep, pay out to buy their piece of the action and then we could start to see the real predator in action.
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