Everyone’s talking e-Commerce in India now. From the doodh-waala to the neighbourhood grocer, everyone wants in a piece of the pie. So I thought I might as well drop in some thoughts on the same.
The Indian e-Commerce market was valued at over $14 Billion in 2012. That’s 14 followed by 9 zeroes for the math-retarded like me. For an industry that follows a hard and cold logic of survival and growth, pretty impressive I must say.
The logic stands simple – cut down on profits to increase customer base, grow in size, eat up market share and in the process kill your competition. It’s more or less like a first-one-to-blink-loses game. The firms fight it out until one of them gives up and blinks. After that, its mostly winner takes all – with either acquiring the competitor or killing it off completely, which happens anyway.
February saw eBay increasing its stake in Snapdeal and April saw Flipkart buying out Myntra. As if the heat hadn’t died out, July ended with Flipkart raising $1 Billion in funding, followed by Amazon’s counter with a $2 Billion investment in India. If one didn’t know better, it’d be more or less like the 3 point rule of fighting elections in India –
- Spend, spend, spend.
- Gain eyeballs
- The one with more eyeballs/votes wins. Hence spend more.
Experts have said that the $2 Billion investment by Amazon means its not out to acquire Flipkart but straight wants to destroy its reign and market share in India. It’s out to kill.
Amazon has struggled in its penetration in the Indian Market, especially since the people are still skeptical about buying stuffs online. And this has hurt Amazon more than anyone due to the local competitive tension provided by Flipkart and others. But that doesn’t mean its a downward spiral. If it was, the $2 Billion investment wouldn’t have happened.
Now comes the questions – who will win the war and would Flipkart’s $1 Billion funding amount to anything?
Well, lets talk about Flipkart first. Though valued at $7 Billion, it has accumulated losses of INR 281 Crore as per the latest details. The war between Amazon and Flipkart to be numero-uno in India is having the same effect on them both – they’re incurring losses by cutting down profits to increase market share. But when you consider the rest of the iceberg behind Amazon and the peanuts lying behind Flipkart, one has to wonder if Flipkart is on its path to annihilation.
Though not much of a celebrity among the initial two, Snapdeal does enjoy its zone-of-comfort. Not in the limelight much, but still moving along. For how long,we’ll have to see. Then you have smaller and/or niche players like Lenskart, Jabong, Shopclues, HomeShop18 etc, who stare at a blank future to some extent – either get acquired, get into the hot-shot league or die a slow death. The chances of the second happening is something I wouldn’t exactly put my money on. They have to decide if they can survive and grow independently or depend on a big time saviour like Myntra needed.
As if these weren’t enough to put the e-Commerce competitors in troubled waters, thoughts have to be given to big conglomerates like Tata and Reliance stepping into the sector. With a solid financial backing to support logistics to any level needed, if they do step in, Amazon and Flipkart are going to have the battle of their lives!
In the meantime, as Flipkart chases a model were it can turn completely profitable and into numero-uno only if 1/3rd the Indian population becomes its customers, and Amazon is ready to take as many blows as it takes to capture the Indian market, we reach the question of who’ll emerge the winner in the end.
Answer – The Customer.
As each one slashes its prices to gain market share, we start getting better quality goods at cheaper rates. More investments means more logistic and technical support and hence more jobs. So, for now, its better to sit back, relax and order a book online and start reading it. Because as long as this battle continues, the customer benefits.
But then again the problems would start when one of them reaches Numero-Uno and then initiates a monopoly. But well that’s another time and another blog post. Until then, enjoy your book.
Inspired from an article I read in The Hindu. Image Courtesy – shannonburns.com