What'll the endgame appear to be? This question might be keeping Flipkart, Snapdeal, and Amazon conscious.
We've seen worldwide that e-commerce is a winner-takes-all market. Since there's little distinction or customer devotion, just one thing issues—discounts. For the most part. Which then boils down to “who has more cash to give away.” That straightforward. The one who survives longest wins. Everybody loses, and likely does a fire sale.
Nonetheless, despite the huge capital raises, all of US knew that accessibility to funds was not infinite. Investors, howsoever optimistic, would’ve to be convinced that they will get an attractive return. There was no “ I will back you till you win scenario that is ,” and we were waiting to see who lasts longest.
All that changed with Amazon’s entry. It isn't just that Amazon has access to large sums of capital, which it surely does. And that is the vital point— till it wins” “, Not if it is sensible, but till it wins.
That changed the game entirely. The new investors in Amazon’s competitions will think it is considerably more challenging to convince themselves that they'll manage to outlast Amazon. Put simply, if you understand you happen to be going to lose, why even try?
That clarifies why Amazon.com Inc. keeps announcing that they are backing the Indian arm with billions of dollars. And that they'll continue to do so. There's no other reason why Amazon would publicly declare its investment decisions. After all, US businesses are regarded as tight-lipped about their investment plans. So when Amazon said that it was investing $5 billion (in two recent statements) in the Indian arm, it had not been an innocuous matter.
So is the goose for Flipkart and Snapdeal? Well, things are seldom that simple in business. So here is an alternate end game: what if they find a way to get an equally deep-pocketed investor who'll invest till they win?
That's what makes the price news of a potential investment by Wal-Mart Stores Inc. in Flipkart so fascinating. It isn't just about the investment. It is the sign you might be sending: till it wins Flipkart may also fight.
We're quite certain these are the ideas in the heads of Binny Bansal and Flipkart founders Sachin Bansal, although we don’t know the answers.
This is what game theory is about you make moves in competitive situations where the result depends on critically on your competitor’s moves. Here, indicating is equally as vital as the real action.
Walmart is not fairly unfamiliar with these ideas. Here's an interesting example of how these notions are used by it. Walmart places itself as a ‘low- price’ player and wouldn't enjoy another player to sell more economical. But it also needs to make a gain. How can Walmart prevent adversaries from pushing the prices down too far?
Any attempt to do that be maybe prohibited and would appear unsavory. It does that with its benign-looking “Price Matching Policy,” which says that Walmart.com will match the cost of any online retailer. That removes any incentive for a competitor to try to be more affordable than Walmart. Paradoxically, this “ not high - cost promise” effectively prevents costs from falling too much.
Will a savvy player like Walmart give unconditional approval to Flipkart? It’s tough to say. What occurs in a scenario where it fits Amazon’s assertion that it is here to win? As many scenarios are possible, there is no endgame that is clear. At some point, if Amazon considers that the price of a scorched earth battle is not too low, it proceed to merge with Flipkart and might sue for peace. Both parties will win if that occurs.
But not everyone will be happy. Suppose that loss are caused by the acquisition cost to the investors that are more recent? Will they prefer it to be a long-drawn conflict?
It is going to be interesting to see how the e-commerce battle shapes up. As consumers, in the interim, you would be well-advised to make the best of the large sales being run by retailers that are online. The sale will last only till the money lasts.