Flipkart Vs Amazon – Stifling E-commerce Competition

Indian E-commerce market is increasing both in terms of customer base & in terms of variety of products being purchased online. With the recent changes in telecom market because of JIO entry; the cost of internet connectivity is at an all-time low. With this increased internet user base, there will be a surge in first time user of E-Commerce. Also, there are signs of acceptance for online shopping as preferred mode of shopping, thereby leading to increased loyal consumer base.

All these changes are leading to a furious competition & consolidation in Indian E-commerce space.  We have already witnessed consolidation of Jabong & Myntra with Flipkart. Now, Flipkart has made another deal with eBay India & made an open offer for Snapdeal after failed talk for a merger.

Amazon Taking over Flipkart

A year back, it was looking that Flipkart has lost the competition to Amazon.  In 2016, Amazon becomes the most preferred online destination for urban consumers in Indian e-commerce space. Amazon has signed up more than 9.5 million subscribers to its Amazon Prime since launch in December 2016. Whereas Flipkart did perform a little better in GMV terms over Amazon, it was struggling to keep the customers satisfied. Amazon was winning the war in term of better service quality, product qualities & variety along with new schemes. The game was turning in favor of Amazon.

But things are different now. With the latest movement in Indian E-commerce, It is tough to take sides now. Amazon with its better service, technological competence, proven organization structure and a huge appetite for cash burning because of other profit making business was clearly at higher ground. When compared to Flipkart which had only GMV numbers on its side, Amazon was a clear winner .

What really has changed?

With the latest round of funding, Flipkart had got 1.4 Billion US $. Another side Amazon had announced 5 billion US $ for its Indian market business which is much higher. But it’s not the amount of funding which is favoring Flipkart now, it’s the investors & strategic deals which Flipkart had sealed.  Flipkart merger with eBay India will provide Flipkart cross border inventory along with the technological competence. With new norms under GST which require registration in each & every state, a larger inventory is a big boost for Flipkart.

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Microsoft investment in Flipkart is clearly not an investment. It is a strategic move by Microsoft to compete with Amazon web services on cloud computing war. Flipkart & Microsoft had already entered into a partnership to adopt Microsoft Azure for cloud computing. This deal will enable Flipkart to access to artificial intelligence, machine learning, and analytics capabilities in Azure.

With both these deals, flipkart is technically competent with Amazon. Also, there has been a change in organizational structure. The company has replaced its co -founder with new CEO Kalyan Krishnamurthy.

Investors game

Flipkart added Ebay, Tencent, and Microsoft to an investor list which already includes Tiger Global Management, Naspers Group, Accel Partners, and DST Global. The soft bank which is the largest shareholder in Snapdeal is working to sell Snapdeal which is continuously losing the competition.  The key player here is Alibaba, who entered the Indian market through investments in Paytm. Alibaba had also invested in Snapdeal in 2015 along with Softbank & Foxconn.

So far Alibaba has not entered the Indian market actively & is playing the waiting game. If, Snapdeal is merged with Flipkart than Alibaba will have shares in both Flipkart (merged with Snapdeal) & Paytm. In that case, Alibaba will have options to back Indian E-commerce players to compete against Amazon or enter the market himself and compete with both Amazon & Indian Players. Chances of the second case are less because of already investments made in these companies. Also, the strategic investment made by Alibaba in Paytm is not of e-commerce but in offline-to-online (O2O) market. This also signals that Alibaba is quite not into in E-commerce himself but is in the O2O market.  Most importantly, entering the market will lead to stiff competition from both established players Amazon & Flipkart. This will lead to long & expensive price wars.

Increased customer service

Whatever is the outcome of this price war & heightened competition, customers will definitely be at advantage. They are about to get better service and possibly more discounts. Along with customers, local goods manufacturers will get an increase in their market presence but will also feel pressure for better quality.

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