After a five-year-long period of headlong expansion, the Indian e-commerce sector has moved into a phase of consolidation. Flipkart is expected to formally buy out its rival Snapdeal in about two months; a term-sheet has been signed and the due diligence process initiated. SoftBank, which is a key investor in both Flipkart and Snapdeal, has already negotiated deals with two of Snapdeal’s backers, Kalaari Capital and Nexus Venture Partners. The merger will mean that India’s e-retail space will effectively be a face-off between Flipkart and Amazon. The thrust towards consolidation is driven by market forces. Flipkart loses over $40 million a month and Amazon absorbs even larger losses. Given such massive burn rates, weaker players will be forced out. But the key unfortunate consequence of consolidation will be the lay-offs. The merger may also impinge on the sector’s ability to generate employment in the medium term. This comes at a time when e-commerce is one of the few engines of employment.
via After IT, it’s e-commerce | Business Standard Editorials
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