Amazon and eBay just started a battle for the last major e-commerce frontier

Online marketplaces hope to bring some order to the chaos of India’s retail sector.
Online marketplaces hope to bring some order to the chaos of India’s retail sector.
Image: AP Photo/Gemunu Amarasinghe
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In the past 24 hours, India’s incredibly weird e-commerce market got not one but two votes of confidence. Yesterday eBay said it will enter into a partnership with Snapdeal, an online marketplace in which it is already a big investor. The new deal will see eBay gain access to Snapdeal’s 18 million users—more then three times the number of users eBay itself claims in India.

Then, early this morning while the rest of the world was busy with news of Amazon’s grocery stores and deal to license kids’ shows,  Amazon quietly opened an India site. Thanks to India’s rules restricting foreign ownership in multi-brand retail, Amazon will not sell merchandise directly, but will follow the same marketplace model of Snapdeal and eBay. That’s not a bad start; the company’s India head told Nextbigwhat, an Indian tech blog, that 40% of Amazon’s e-commerce business comes from its marketplace. For the moment, Amazon India lists only books and DVDs, but it promises electronics in the future.

Amazon may have a tough time convincing costumers to switch allegiances from large Indian sites such as Flipkart. Amazon will take much longer to deliver orders than domestic firms. It is also charging for some services, such as cash-on-delivery, which Indian platforms tend to offer for free.

Still, it’s pretty obvious why two of the world’s largest e-commerce companies see an opportunity India. Domestic e-commerce firms are failing at an alarming rate. One recent report suggested that less than a third of e-commerce firms backed by venture capital will survive into the next year. Half of e-commerce firms set up in the first 10 months of last year already having ceased to exist.

Estimates of the value of India’s online shopping market vary wildly, from 10 million to 20 million shoppers spending somewhere between $800 million and $10 billion last year. But one thing is clear: with just over a tenth of India’s 1.2 billion people using the internet online, the potential for growth is tremendous. So when Kunal Bahl, Snapdeal’s boss, tells the Wall Street Journal that ”India is the last large frontier for e-commerce,” it’s not just a snappy soundbite—it’s a business opportunity.