Flipkart vs Snapdeal: E-commerce giants tremble under investors’ pressure

Flipkart and Snapdeal, two of the biggest e-commerce companies from India, saw a showdown on Friday evening, when Flipkart’s Sachin Bansal and Snapdeal’s Kunal Bahl engaged in a verbal spat on Twitter.

Sachin Bansal took the first dig by tweeting,

Alibaba deciding to start operations directly shows how badly their Indian investments have done so far

— Sachin Bansal (@_sachinbansal) March 25, 2016

To which, Bahl said:

Didn't Morgan Stanley just flush 5bn worth market cap in Flipkart down the ��? Focus on ur business not commentary :) https://t.co/8NpkhWWo2j

— Kunal Bahl (@1kunalbahl) March 25, 2016

This verbal exchange was not just a spillover of their world-known rivalry but also showed the pressure that they are under, because of the investors slowly sealing their moneybags.

"While in 2014 it looked like the game had consolidated between Flipkart and Amazon, the market suddenly opened with Snapdeal, Paytm and Shopclues jumping into the fray," Harminder Sahni, founder of retail consulting firm Wazir Advisors, told ET. "Now investors are evaluating (ecommerce firms) closely... so it becomes (important to establish) not only how good you are but also how bad the other players are."

The year 2016 is widely expected to be an inflection point for Flipkart and Snapdeal, who along with Amazon dominate India's $23-billion (Rs 1.5 lakh crore) e-commerce market but are yet to make profits.

Because of this, investors who have put in billions of dollars into Flipkart and Snapdeal are now compelling the managements to optimise their operations, while letting go of discounts and focusing on improving margins.

As per some reports, Flipkart, which has been in the market awhile to raise $1.4 billion, had approached Alibaba for funding, but couldn’t convince them.

Snapdeal, however, was able to raise $200 million in February in a funding which was led by Ontario Teachers' Pension Plan at a valuation of about $6.5 billion.

"The pressure is too much," said Sahni. "I don't think we have seen this kind of a public spat between people from the industry in the modern times. Back in the 1980s-90s we saw this when the polyester wars were on between Mr Dhirubhai Ambani (Reliance Industries) and Mr Nusli Wadia (Wadia Group). But those were industrialists at the time of 'License Raj;' these are professionals who do not even have publicly listed companies but have built businesses on funding."