Both lift investments in bid to capture slice of nation's untapped internet economy
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 14, 2017).
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NEW DELHI -- Amazon.com Inc. founder Jeff Bezos appears set to tangle with a formidable new adversary in India: Masayoshi Son, the brash billionaire who helms Japan's SoftBank Group.
The prize: e-commerce superiority in one of the last great untapped internet economies.
After failing to capture much of the market in China, Mr. Bezos is investing $5 billion to expand Amazon's India operations. Since launching in 2013, the firm has used its technological expertise and slick advertising campaigns to pull neck-and-neck with homegrown e-commerce leader, Flipkart Group, in a country where many consumers are only now shopping online for the first time via inexpensive smartphones.
Meanwhile, Mr. Son's conglomerate is set to inject roughly $2.5 billion into Flipkart, a person familiar with the matter said on Thursday. While declining to confirm the amount, Flipkart said the investment, combined with $1.4 billion raised in April from Tencent Holdings Ltd., eBay Inc. and Microsoft Corp., would lift Flipkart's cash level to more than $4 billion.
The funds would come from SoftBank's nearly $100 billion Vision Fund -- the world's largest technology fund -- that Mr. Son is using to invest in emerging fields and promising markets.
The talks with Flipkart come after SoftBank attempted in recent months to push India's No. 3 online retailer, Snapdeal.com, which it has backed, into a merger with Flipkart. Those talks broke down late last month.
"We want to support innovative companies that are clear winners in India because they are best positioned to leverage technology," Mr. Son said in a statement announcing the deal.
The focus on India underscores the global battle for the country's internet users. U.S. tech giants like Amazon -- as well as Facebook Inc. and Uber Technologies Inc. -- are squaring off against Japanese and Chinese firms like SoftBank, Alibaba Group Holding Ltd. and Tencent, with all parties betting that even a modest slice of the growing Indian market is worth the fight.
India's e-commerce market alone should be worth some $63.5 billion by 2021, according to Satish Meena, an analyst at research firm Forrester, up from a third of that this year. By comparison, China had $681 billion in sales last year, nearly double the U.S., making it the world's biggest e-commerce market, said Mr. Meena.
As part of a transaction with Flipkart, SoftBank would provide the local player not only with a substantial cash infusion that it could use to invest in infrastructure and expand its services, but Flipkart would also benefit from the know-how of executives at Chinese e-commerce giant Alibaba, according to a person familiar with the negotiations.
Mr. Son first invested in Alibaba in 2000, when it was a tiny firm, and has compared the group of companies in which SoftBank has invested to a kind of Silicon Valley network, where tips are traded among peers.
"We remain committed to our India business with a long-term perspective, " an Amazon spokeswoman said. E-commerce in India is "at a nascent stage" and "will require investments for many years."
"Geography-wise I think now India has the best opportunity in front of us," Mr. Son said at a conference in New Delhi in December, highlighting the country's huge population and many English speakers. He said SoftBank investments in India will surpass $10 billion over 10 years.
Alok Sama, president and chief financial officer of the company's international arm, wrote in a local Indian newspaper column last month that online shopping in India was poised to take off as consumers leapfrog organized retail and "gravitate directly toward mobile e-commerce."
According to corporate filings last month, Amazon has just received its latest tranche of cash, some $260 million, which it can use to fuel its operations.
"Amazon has clearly made India a top priority," said Oscar Orozco, an analyst at research firm eMarketer. Data show that while Flipkart got a head start in the South Asian nation, having been founded a decade ago, Amazon has rapidly risen to prominence.
India's e-commerce companies do not share their sales numbers, but some 35% of mobile device users in India opened Amazon's app at least once between May 10 and June 10, according to New York-based research company 7Park Data.
That was up from 25% a year earlier, and higher than the 33% who opened Flipkart's app and 9% who opened Snapdeal's. Rates for both Flipkart and Snapdeal dropped slightly over that time. Some 79% of internet usage in India is done on mobile devices, online analytics provider StatCounter said in March.
Flipkart could also use the new funds from SoftBank to push into an area Amazon has moved first to dominate in India: online grocery deliveries. A Flipkart executive was quoted by a local newspaper in India last month as saying the firm plans to launch such a service in several cities, but a company spokeswoman declined to comment.
Amazon already provides food deliveries from third-party grocery stores, and has applied to invest roughly $500 million to build a nationwide network to stock and deliver items directly to consumers, according to an official at India's Trade Ministry. It has also brought to India such services as its Prime membership program, its video streaming service and its Fire TV stick, betting that its ecosystem of products will build brand loyalty.
To be sure, e-commerce retailers in India must also contend with what appears to be moderating growth in India's online shopping sector. After seeing expansion of more than 100% annually in 2014 and 2015, the sector grew 34% last year, according to Forrester, and should expand at a similar rate in the years ahead.
Laura Stevens in San Francisco contributed to this article.
Write to Newley Purnell at newley.purnell @wsj.com and Mayumi Negishi at firstname.lastname@example.org
(END) Dow Jones Newswires
August 14, 2017 02:47 ET (06:47 GMT)
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