The ecommerce industry is currently a regulatory quagmire and customer loyalty is hard to come by. However, armed with deep pockets and tailored strategies, Amazon, Flipkart and Snapdeal are jockeying for the number one slot in the Indian ecommerce market
Alice Mathew, 46, recently bought a T-shirt for her younger son from Snapdeal because it was offering a “better deal”. “The price difference was almost Rs 100 for the same product on Flipkart.com,” says Mathew, an assistant professor at Mount Carmel College, Bangalore. Her rationale: “When I shop online, I look for the best deal and the best product. It doesn’t matter which site I’m shopping from.”
Her shopping philosophy is hardly unique: The Indian online customer is typically vendor-agnostic, and seeks the lowest price for the product of his/her choice. The online marketplace becomes a vast hunting ground for the best deals, with multinational behemoths and Indian ecommerce giants jostling to offer the best prices (at the cost of margins) to lure the fickle customer rupee.
The intensity of competition has heightened over the past year. And the fight for the top slot in the $3.1 billion Indian ecommerce industry has evolved into a three-way tussle: Global biggie Amazon Inc, with a $143 billion market cap, entered India last year and is the most deep-pocketed. Bangalore-based Flipkart, with its recent funding of $210 million from Russian firm DST Global Solutions, has now received nearly $780 million in funds since it started operations in 2007. It recently paid $300-330 million to acquire rival Myntra (India’s largest fashion etailer) to strengthen its position in the fashion space. And the third, Snapdeal, which raised $100 million in May, mostly from investors such as Temasek Holdings, BlackRock Inc and PremjiInvest. It had earlier got $134 million from eBay Inc and others.
Flush with funds, they are now vying for customer mind space and wallet. But the lack of brand loyalty coupled with the absence of any major differentiators in terms of offerings and services is fast emerging as their biggest challenge. Promises like cash on delivery (CoD), assured delivery, no-questions-asked replacement policy, zero cancellation fee, free shipping and EMI options are no longer good enough for customers.
“That’s the reason ecommerce players either try to kill competition or merge with each other—to reduce consumers’ options so as to ultimately leave them with only one option and force them to be loyal,” says Harminder Sahni, founder and managing director, Wazir Advisors, a retail consulting firm.
In lieu of loyalty, the three competitors are focusing on strategy as their weapon of mass annexation.
Amazon: Customer-Centric
It has been 20 years since Amazon started, but it is yet to turn profitable. That, however, has not stymied its aggressive and high-investment business model in every market, and India is no exception. Since it launched here in June 2013, Amazon has already built one of the biggest online product assortments in the country. As Indian laws prevent foreign ecommerce firms from starting a wholly-owned company selling directly to consumers, Amazon.in is operating as a marketplace for buyers and sellers: It offers over 15 million products across 28 categories.
Having established Junglee, Amazon is investing in the expansion of its own seller base. When it launched, it had less than a 100 sellers; today the figure stands at more than 5,000. To attract clients, it has introduced two ‘fulfillment centres’ which manage the entire purchase value chain, including warehousing, logistics, packaging and customer services, for sellers who opt for it. “The centres absorb the logistics and distribution burden so that sellers can focus on optimum selection and pricing,” says Agarwal.
The company is tapping customers in non-metros and tier-II and tier-III cities; 60 percent of its sales come from these areas, and Snapdeal is hoping to widen its reach. “Urban India has access to offline stores. Our focus is on places where they can’t get the product they desire,” says Kunal Bahl.
(This story appears in the 27 June, 2014 issue of Forbes India. To visit our Archives, click here.)