eBay Is About to Receive $1.1 Billion From Walmart. Now What?

eBay (NASDAQ: EBAY) was part of a funding round for Flipkart last year, when it raised $1.4 billion at an $11.6 billion valuation. Just over a year later, it's selling its stake in the company to Walmart (NYSE: WMT) as part of a $16 billion acquisition valuing Flipkart at over $20 billion.

As part of last year's deal, eBay gave control of eBay India to Flipkart. Part of its agreement to sell its stake to Walmart included taking back control of eBay.in and ending its strategic relationship with Flipkart. eBay plans to take Walmart's $1.1 billion and relaunch its marketplace, competing for a piece of the rapidly growing Indian e-commerce marketplace with Walmart-Flipkart and Amazon (NASDAQ: AMZN).

Finding a market for its marketplace

eBay's press release announcing the sale of its stake in Flipkart was relatively light on details. "We plan to relaunch eBay India with a differentiated offer to focus initially on the cross-border trade opportunity," the statement read.

eBay wants to help foreign businesses sell more items in India. Establishing a retail presence in India is often difficult for foreign companies given India's foreign-direct investment laws, which require a company to source a certain percentage of its business within India. It's a law that has kept lots of global retailers out of the space and why Amazon exclusively operates a third-party marketplace in the country.

eBay also wants to help Indian businesses sell more goods in other countries. With local marketplaces established all over the globe, eBay is well-positioned for that purpose as well.

eBay's statement says it has reason to believe there's a significant opportunity in cross-border transactions. That may come from its experiences working with Flipkart or Snapdeal, another Indian e-commerce company it's invested in, or from its own global marketplaces. Either way, eBay is pursuing the Indian e-commerce market in a way that's very different from Amazon's and Flipkart's approaches.

Taking on the duopoly

Finding a differentiated angle is key. Flipkart and Amazon combined to take 84% of the Indian e-commerce market in April, according to research from 7Park Data. What's more, they're increasing their share of the market at the expense of the little guys.

Amazon has been able to grow rapidly since introducing its Prime membership in the country in 2016. For just 999 rupees (about $15) per year, Amazon customers in India get similar shipping and video-streaming benefits as U.S. Amazon Prime members. And Amazon is constantly adding more merchants and products to its marketplace and more fulfillment centers and delivery stations across the country to make the service better.

Flipkart, meanwhile, remains the go-to source for buying mobile phones and other electronics, and it's making excellent progress in getting consumers to buy apparel online. The addition of Walmart's expertise could have it selling groceries and other staples online in the near future.

eBay needs to develop a unique roster of merchants and a distinguishable product catalog in order to attract customers from Flipkart and Amazon. Focusing on foreign merchants should help.

The opportunity is still massive

There's a reason Walmart was willing to pay $16 billion for 77% of Flipkart: The opportunity in Indian e-commerce is massive. Online sales are expected to grow from $38.5 billion last year to $200 billion in 2026, according to analysts at Morgan Stanley.

India's the second-biggest economy in Asia, and growing extremely quickly. It's already the world's second-biggest internet market in the world, and only 35% of the population is online. And wireless data plans are becoming increasingly accessible in terms of price and availability. Those trends are fueling the growth in e-commerce in the country.

Since eBay was able to take back eBay.in in the deal with Walmart, it doesn't have to start from scratch to take advantage of the opportunity. And while it's had some missteps in India (which resulted in its deal with Flipkart in the first place), the opportunity is big enough to take another shot. And with the help of $1.1 billion from Walmart, eBay just might be able to make it work this time around.

10 stocks we like better than eBayWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and eBay wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 8, 2018

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon and eBay. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.