Flipkart Infuses $686 Mn Investment In Its Wholesale Arm

Ecommerce giant Flipkart has infused $686 Mn in its wholesale arm ‘Flipkart India Private Limited’, making it the single-largest fund injection into any of its units, in the past few years.

According to the documents filed at the Registrar of Companies (accessed by Paper.vc), the investment was made in February 2018 from Flipkart’s Singapore entity.

The Flipkart’s investment into its wholesale arm is over six times led by rival Amazon so far into its wholesale arm, Amazon Wholesale India Pvt. Ltd. The business-to-business marketplace that operates Amazonbusiness.in, received $52.6 Mn (INR 341 Cr) in funding from Amazon’s Singapore-based entity, Amazon Corporate Holdings Pvt. Ltd. last year. In 2016, it had received funding thrice from the parent company.

To date, Amazon has invested over $109.8 Mn (INR 716 Cr) in its wholesale arm.

In case of Flipkart, the investment is the third of its kind infusion reported in the recent weeks. Earlier this week, it was reported that Flipkart infused $176 Mn (INR 1,148 Cr) in its business-to-business fashion arm Myntra Jabong Private Limited. Apart from this, it has also infused over $56.7 Mn (INR 370 Cr) into Flipkart Internet, the company’s online retail platform recently stated ET report.

The recently secured fund will aid Flipkart in stepping up its ante to take on the US-based Amazon, and Alibaba-backed Paytm Mall in India.

It is further reported that Flipkart will invest in B2B commerce this year for selling to customers globally in 2018 through its tie-up with US-based online marketplace eBay. The company had launched ‘Flipkart Global’ last year to allow users from about 200 international markets to purchase products on its marketplace.

Flipkart Vs Amazon: The War Goes On

For Flipkart, raising funds worth $4 Bn in 2017, proved to be its elixir as it renewed its aggression towards accepting the ecommerce competition in India more fiercely. Flipkart’s closest rival Amazon which is committed to spending $5 Bn in India has also been stepping up investments consistently.

Both the companies have been investing heavily in the different segments including digital payments, logistics, online grocery as well as private labels to boost up the overall market position.

Digital Payments

Flipkart so far is bullish about its digital investment arm PhonePe and so as Amazon for Amazon Pay. And the results are evident as well.

PhonePe received $500 Mn investment in October 2017, post raising $38.7 Mn from the parent firm. The funding commitment adds to the $75 Mn funds infusion Flipkart has made in the UPI app since acquiring it in 2015. Since then, PhonePe has pulled up its efforts to build its separate identity in both online and offline domains.

PhonePe claims to have achieved a total Payments Volume (TPV) annual run rate of $6.1 Bn (INR 40K Cr) within 14 months of its launch. The company is targeting to double this metric by March 2018. On the offline front, PhonePe is banking on the strategy of deploying its own point-of-sales (PoS) payment terminals at small merchant locations as well as partnering with major merchant chains at the national level to enable PhonePe-based payments at its outlets.

In case of rival Amazon, the firm has already increased the authorised capital of its payments arm from $61.5 Mn (INR 400 Cr) to $307.7 Mn (INR 2,000 Cr) in the last couple of months. Prior to that, Amazon also fuelled $20 Mn (INR 130 Cr) in July 2017 $10.45 Mn (INR 67 Cr) in May 2017.

However, despite gaining large sums of money since its entry into Indian payments space in 2014, Amazon Pay has not been able to gain a level ahead against its incumbents including Alibaba-backed Paytm.

Logistics

Logistics is one segment, where Amazon has been actively investing since its entry into the Indian market. The company currently boats 41 fulfilment centres and despite reaping in losses have continued investing large sums in this segment.

Amazon operates its logistics in India through Amazon Transportation services. In August 2017, Amazon revealed its plans to infuse another $62.7 Mn (INR 400 Cr) in its Indian logistics arm Amazon Transportation Service, ATS. Earlier, in June 2017, ATS received $32 Mn (INR 207 Cr), while $10 Mn (INR 67 Cr) were infused in September 2016.

Also, it has been reported that its flagship unit Amazon Seller Services has received over $1.3 Bn (INR 8,150 Cr), so far in FY18 from its US parent, according to filings submitted with the Registrar of Companies. Just last month, it infused $306 Mn (INR 1,950 Cr) funding in its Indian arm, Amazon Seller Services.

Flipkart has also made investments of similar worth in its logistics subsidiary ekart. It has invested around $717 Mn in its logistics subsidiary Ekart in 2017 alone.

Food and Grocery

Indian online grocery is a $400 Mn market and both Amazon and Flipkart are trying to tap their way in a different manner here.

After receiving a go-ahead from the Indian government to invest $500 Mn in India’s food retail space in July 2017, Amazon recently became the first foreign company to set a food retails business in India. This will allow Amazon to sell locally made and packaged food to the consumers directly, and will compete with other leading online grocery and food platforms like Grofers and BigBasket, both of which recently raised massive funding.

Flipkart, on the other hand, is reportedly looking to set up a chain of retail stores across the country, in partnership with global retail giant Walmart who is, in turn, planning to acquire more than 40% stake in the homegrown ecommerce unicorn. If the deal materialises, Flipkart will be able to procure grocery and consumer goods directly from Walmart’s wholesale stores, which would, in turn, ensure better delivery speed and product availability.

Last November, Flipkart also made a soft launch of its online groceries category under the brand name Supermart in Bengaluru. As per reports, Flipkart is building a dedicated supply chain for its grocery category under Supermart. This is Flipkart’s second attempt into the online grocery segment, after the shutdown of ‘Nearby’ in 2016.

Private Labels

There was a time when Flipkart had to roll back many of its private labels. But with the onset of 2017, Flipkart has launched as many as five new private labels, the most prominent being MarQ and Billion. Under these private labels, Flipkart has launched its in-house manufactured smartphone and electronics product with a ‘Made In India’ tag.

Flipkart’s fashion subsidiary Myntra has already claimed growth in its revenue owing to the private labels and going further is aggressively betting on expanding its private label series with its sister company Jabong.

The success of Flipkart Group has propelled Amazon India to gear up to launch a number of in-house brands across multiple categories in 2018 as well. So far, the Jeff Bezos-founded company has launched more than five private label brands. This includes Amazon Basics, Symbol, Myx and Solimo.

As an Amazon spokesperson stated in an earlier interaction with Inc42, “We will  continue to evaluate any need gaps in the selection that may be served by launching specific products in that category to help achieve this goal of widest selection.”

As of now, Amazon has not given any indications towards further investment, particularly into the private labels. However, as it is said to be looking to enter into several categories like beauty, wellness, cooking, etc, with private label offerings, a number of acquisitions might be on the radar of the US-based ecommerce giant.

Having said all this, both Amazon and Flipkart currently seem to be running in a never-ending race. The fresh pumping of funds signals the Flipkart Group’s intent to ramp up investments in the online retail business, with a focus on increasing the number of monthly transacting customers.

Being a foreign company, Amazon’s battle is far tougher in comparison to the homegrown player Flipkart. Both are fighting their own wars on several fronts in order to claim the top position in the Indian ecommerce market, which is said to reach to $33 Bn registering a 19.1% growth in 2016-2017. However, with investments flowing in for both Flipkart and Amazon, space will see a fierce competition in the years to come with many new product offerings from both the retail spaces to acquire and retain their customers.