EBay also invested $500 million in Flipkart in addition to selling eBay.in. The move may be to battle Amazon.in’s growing dominance.

As competition heats up in the Indian e-commerce industry, eBay Inc. and online marketplace Flipkart Internet Private Ltd. will partner to combat Amazon.com Inc.’s growing dominance in the country.

EBay will sell its operations in India, eBay.in, to Indian online marketplace giant Flipkart in addition to a $500 million cash investment in Flipkart, eBay said Monday. The deal, expected to close later this year, will mean that Flipkart acquires all of eBay’s buyers in India.

India is ground zero for the global cage match of e-commerce

Additionally, “eBay and Flipkart entered into an exclusive agreement in which they will jointly pursue cross-border trade opportunities to make eBay’s global inventory accessible to more Indian consumers, while eBay’s millions of active buyers globally will have access to more unique Indian inventory provided by Flipkart,” eBay said. Microsoft Corp. and China’s Tencent also invested in Flipkart during this round of funding.

India is ground zero for the global cage match of e-commerce,” says David Spitz, CEO of marketplace technology company ChannelAdvisor Corp. “It’s where Amazon and Alibaba are colliding and everyone is positioning their bets—basically Amazon versus everyone else.”

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The Flipkart agreement gives eBay a stronger foothold in the market and aligns the online marketplace with internet heavyweights such as Tencent and Microsoft against Amazon, Spitz says. “At the very least, consumers will be the main beneficiaries as the heavies seek to out-innovate and deliver more value to the consumer.”

EBay entered India before other current e-commerce leaders in the country in 2004 by acquiring Bazee.com, an Indian auction site. While eBay was a relatively early entrant in India, eBay.in has the lowest traffic from Indian consumers among the three marketplaces, according to SimilarWeb Ltd. data. It has 31.9 million monthly visitors as of March 2017, versus Flipkart’s 109.4 million and Amazon.in’s 194.0 million, SimilarWeb data shows. Flipkart launched in 2007 and Amazon opened e-commerce operations in India in 2013.

“We think this is the right move for eBay, as going head-to-head with Flipkart and Amazon in India is an uphill (very expensive) battle it is not likely to win. Instead, we view eBay’s $500mm investment and partnership with Flipkart as acceptable exposure to the opportunity, and also removes the potential scenario of a much more protracted spend of an unknown amount as it tries to compete alone in India,” Ben Schachter, analyst at investment firm Macquarie Capital Inc., wrote in a note to analysts. “The key is the growing threat from Amazon India.”

Amazon has invested heavily in its Indian marketplace, spending $5 billion in India to date, including $3 billion in 2016 alone.

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Amazon last year launched its Prime service in India, which allows Indian consumers in more than 100 cities to get unlimited one- and two-day delivery of goods ordered on Amazon.in from merchants that use Amazon’s Fulfillment By Amazon service. FBA enables marketplace sellers to outsource warehousing, fulfillment and delivery tasks to Amazon. Consumers can join Prime and receive unlimited free shipping, but one- and two-day delivery is not guaranteed for those customers not in the initial Prime cities.

It is the first time Amazon has made Prime available in a developing region, but Amazon has made clear it wants to play a big role in e-commerce in India since it launched Amazon.in in mid-2013. “Customers and sellers can count on us to continue innovating and investing heavily in India,” Amazon CEO Jeff Bezos said in 2015. In India, Amazon operates only as a marketplace; it does not sell any goods directly due to Indian laws that prohibit foreign companies from selling their own products online.

E-commerce is nascent in India, but growing fast. Only 19% of Indian consumers shop online and e-commerce accounts for 1.7% of total retail spending, according to Internet Retailer’s 2016 Global 1000. However, e-retail sales in India grew 129% last year and clock in with a five-year compound annual growth rate of 67%, per Global 1000 data.

“Amazon, with deep pockets, continues to fight it out, but over the long term Amazon will win out over the Indian players just because they provide much better customer experience—which will be the key differentiating factor in the [Indian e-commerce] industry,” says Yogesh Krishnan, marketing consultant at Mad Street Den and formerly director of marketing at Lister Technologies, a consulting firm that works with Indian e-retailers.

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