With the digital revolution in India came the e-commerce sector, completely transforming the way consumers purchase items across all segments. This sector saw its fair share of ups and downs in the past decade, with lowest points in the form of policy changes regarding deep discounts and vendor monopoly, and the highest peak in the form of the government allowing FDI investments up to 100%. While the industry’s growth slowed around the middle of last year, it eventually regained its footing and grew into Tier II and III cities. Flipkart and Amazon have emerged as the giants leading the pack. Having a closer look into their can tell us a lot about the industry as a whole.
The race to be hyper-local
The two companies continued to go head-to-head last year in their quest to grab a dominant piece of the market share. With Amazon Fresh entering the food and groceries delivery space, Flipkart announced its new program, FarmerMart to give Amazon a run for its money. While the program is yet to be launched, it’s already a large threat to existing e-commerce entities that operate within the same space, such as Liscious and FreshToHome as it plans to sell meat products as well. It is clear that with these offerings, the two brands intend to enter the hyper-local market that’s being captured by the likes of Swiggy, Grofers, and Bigbasket at the moment, in order to capitalise on the hitherto untapped Tier – II and Tier – III marketplace even further. Additionally, Amazon acquired a piece of Future Group’s Future Coupons, which operates supermarket chains like BigBazaar and EasyDay, in what is clearly an effort to grab more consumers from offline-friendly Tier – II and Tier – III cities. This puts the brand in a unique safety net of its own making – if it fails to capture Tier II and Tier III audiences via its own e-commerce ventures, it can certainly do so through digital supermarket chains linked with brands that consumers already know and trust.
Grabbing India’s OTT market share
Amazon’s Prime has captured audiences across the country with multi-lingual on-demand content along with original content, making it one of the most popular OTT platforms in India. With the OTT industry still being in its infancy, PwC estimates that it will be worth 11,970 Cr by 2023, which is why we saw over 30 new platforms emerge in just 3 years. New to the market but determined not to be bested by Amazon, Flipkart announced its own OTT platform this year, informing audiences that it will start its foray into the industry by streaming licensed content from Disney and Balaji.
Having launched a separate video tab in its commerce app, Flipkart has taken a different approach compared to Amazon (which has a separate Prime Video App) possibly to help in easier discovery of their video offering for their users since its a very new right now. I am expecting Flipkart to launch a separate app for the OTT offering in 2020 specially for the smart TV and devices ecosystem much like Facebook Watch. This will certainly see the two brands compete to win more market share within this space. Flipkart’s content platform being free will certainly inspire high viewership numbers, however, ultimately, the quality of shows offered may work as a stronger decision factor for viewers choosing between paying for Prime or collecting 300 coins on Flipkart to enter the loyalty program that gives them access to their shows. As of now, with its latest offering, Audible Suno, a podcast app that offers original content in Hindi and English, Amazon is certainly leading the way in terms of having two diverse content platforms.
Flipkart takes the lead in revenue
Though the two brands seem to have had a similar journey in 2019, the year saw home-grown Flipkart garner greater revenue than Amazon. However, on the other hand, Amazon enjoyed a higher growth rate of 82%, while Flipkart only saw a growth rate of 47%. Flipkart also dominated the smartphone market in terms of the budget phone segment while Amazon lead the way for premium smartphones.
The two brands also held a festive sale from 29 September to 04 October, during which they made headlines for a Gross Merchandise Value (GMV) of over $3 Billion. However, even in this race, Flipkart charged ahead of Amazon, with a 60-62% standalone share of the GMV. Interestingly, a large chunk of these sales came from Tier-II cities, proving once again that the future of all things digital lies in these untapped markets.
Fashion – a one sided affair
With fashion and beauty segments dominating most e-commerce sales, its important for the two brands to strengthen their foothold in this specific market. Flipkart, of course, built a strong foundation with the acquisitions of Myntra and Jabong. Further, they strategically consolidated their users between the two brands by limiting discounts on Jabong and diverting users from Jabong to Myntra over the past couple of years before finally shutting down the Jabong platform earlier this month. On the other hand, Amazon rests solely on Amazon Fashion which needs to improve a lot both from a catalogue as well as user experience perspective. As a result, we can expect to see Flipkart race ahead in yet another segment.
It may be interesting to note that Amazon was in talks to acquire Jabong back in 2014 but the deal didn’t go through and eventually Flipkart’s Myntra ended up acquiring Jabong in 2016.
Even with these developments, 2019 was not a rosy year for the e-commerce industry. With the Trade Ministry announcing new regulations that dictate the way e-commerce platforms run their business, the year had a rocky start to say the least. Certain regulations, like disallowing e-tailers from selling products offered by brands they own, practically forced Amazon to revamp its online catalogue, with Cloudtail, it’s largest vendor, being owned by the giant. With regulations prohibiting e-tailers from sourcing over 25% of products from a single vendor, offering deep-discounts, and creating monopolies with vendors or brands, both, Amazon and Flipkart had to redesign their business model to adapt, which they did, while also putting in pleas for more stable policies.
What 2020 holds for the ecommerce industry
With the Indian government offering a new framework to prevent cross-border data flow, regulate taxation, facilitate the growth of the digital economy and put a stop to product counterfeiting, the two brands must be incredibly flexible in this year. Though they’ve already had to make significant changes to their operations and set-up, they may find themselves in the same position once again. With the two spreading into multiple avenues such as hyper-local deliveries, OTT platforms, e-wallets, and more, they must comply with data privacy policies in order to stand a chance to compete in one of the largest e-commerce markets in the world – India.
Though 2020 may see some turmoil in the form of these changes, the decade on the whole spells positive news for the e-commerce sector, with the potential of untapped markets just waiting to be harnessed. The largest challenge may come in the form of Reliance’s e-commerce venture, as the company will certainly put in hefty funds to gain momentum in the market to make up for its late entry. Read more about Flipkart vs Amazon e-commerce market in India.