Amazon recently launched its price comparision venture Junglee.com in India, a company which it had bought 14 years ago for $250 million. You can not directly buy anything from the site but rather are redirected to the third party vendors who do the billing and delivery. Junglee will aggregate products from different websites such as Homeshop18, Univercell, Hidesign, Gitanjali, The Bombay store, Fabindia, Bata, Dabur, Reebok and ofcource Amazon.com.
Here are some myth busters
1) Amazon thinks that this is the best strategy to enter India
All over the internet I am reading discussions over why this model is innovative and awesome. The fact is that they dont have any other choice. Restrictions on FDI in retail in India mean that Amazon can not have an Amazon.in very soon. This leaves them with no choice but to enter the market as an aggregator. There is some substance though in this move too. Junglee will give Amazon some important insights about Indian buyer's mentality and a loyal customer base which it can exploit once the Govt. approves FDI in retail.
Secondly, This will dilute the e-commerce market substantially. In retail industry its extremely important to not let your competitors gain the advantage of scale. Junglee would help a lot of small players to get a bigger pie of the market and hence will make the major players like flipkart.com loose some of their market share. This would mean that when Amazon enters india there wont be a handful of e-commerce giants with enough economies of scale to counter the financial muscle of Amazon.
2) Amazon overvalued a company which no one knew in India and ended up paying $250 million for a domain name
I would have loved it if this was true. Would have made a funny story. But Amazon paid this much amount not for the existing customer base of Junglee but for the technology it developed to manage and compare enormous amount of data from many sources. This was later also used to evolve the Amazon market place. (Though marketplace found its nemesis in ebay and never really fared well)
3) Flipkart is screwed now
Yes its true that if you pick a random book on Flipkart and check its price on Junglee you will in most probability find the book much cheaper on Junglee. But the products are provided by third party websites which existed even before the launch of Junglee and Flipkart grew inspite of them. Its also true that Junglee will give these small websites the visibility and scale to compete with Flipkart but the fact that Flipkart serves 30,000 customers daily, providing highest level of satisfaction, can not be ignored. The strength of Flipkart is its excellent delivery system, convenient payment options and consistent service level. The small vendors, if they fail to show similar strengths( they have failed miserably until now), would not be able to compete on price points for long. The equation in terms of its strengths is still unchanged for Flipkart.