Ama­zon Steals March Over Snapdeal, Nears Flip­kart

US co be­comes In­dia’s 2nd-largest on­line mar­ket­place by ship­ments in March; only ma­jor player to in­crease share from a year ago

The Economic Times - - Front Page - Mad­hav.Chan­chani @times­group.com

Ben­galuru: Ama­zon was In­dia’s sec­ond-largest on­line mar­ket­place by ship­ments last month, in­dus­try es­ti­mates show, as it dis­lodged Snapdeal to be­come the only ma­jor player to in­crease share from a year ago.

Mar­ket leader Flip­kart’s share of ship­ments fell to 37% in March from 43% in the same month in 2015, and Snapdeal’s fell to 14-15% from 19%, show es­ti­mates by an in­vestor track­ing the lo­gis­tics mar­ket and the chief ex­ec­u­tive of­fi­cer of a lo­gis­tics com­pany that han­dles ship­ments for on­line re­tail­ers. Ama­zon In­dia’s unit mar­ket share surged to an es­ti­mated 21-24% from 14%.

Although the data are snap­shots of ship­ments a year apart, they def­i­nitely point to a drop in the vol­ume mar­ket share for the In­dia-based com­pa­nies. Other in­dus­try ex­perts and an­a­lysts cor­rob­o­rated the num­bers. Ama­zon In­dia has gained mar­ket share among hor­i­zon­tal etail­ers, dis­lodg­ing Snapdeal from sec­ond slot

Though Flip­kart has lost mar­ket share, it re­mains the leader by a mar­gin pri­mar­ily due to strong pres­ence in fash­ion

Snapdeal is fo­cussing on mon­etis­ing its ex­ist­ing cus­tomer base through pay­ments, on­line travel, food & gro­cery de­liv­ery Bat­tle for lead­er­ship in the etail­ing mar­ket may be­come a 2-horse race be­tween Flip­kart & Ama­zon Flip­kart Ama­zon In­dia Snapdeal 8-9 LAKH/DAY To­tal goods shipped by etail­ers in March 2016

They said the data were ev­i­dence of the larger unit mar­ket share trend in In­dia’s ecom­merce in­dus­try, although at least one re­cent es­ti­mate pegs Flip­kart and Snapdeal ahead of Ama­zon In­dia by sales.

“Ama­zon is very rapidly tak­ing mar­ket share from com­pa­nies like Snapdeal and other smaller play­ers. If there is no new en­try, it will be a two-horse race (be­tween Flip­kart and Ama­zon) by the end of the year,” said Satish Meena, a se­nior an­a­lyst with For­rester Re­search. “If Flip­kart is not able to get its act to­gether in the next 612 months, Ama­zon can over­take Flip­kart also.”

Mor­gan Stan­ley es­ti­mates that In­dia’s on­line re­tail mar­ket, in­clud­ing de­liv­ery of food and gro­cery, will be worth $119 bil­lion by 2020 from $16 bil­lion in 2015. Flip­kart said in June 2015 that it was aim­ing to sell goods worth up to $12 bil­lion in a year; Snapdeal had claimed it would do bet­ter than Flip­kart; and Ama­zon has not dis­closed a sales tar­get. If Ama­zon is gain­ing mar­ket share, it will be an­other in­stance of a multi­na­tional in­ter­net com­pany show­ing signs that it can be­come the dom­i­nant player in In­dia. In the ride-hail­ing busi­ness, San Fran­cisco-based Uber says it is catch­ing up fast with mar­ket leader Ola, which in turn con­tests the claim.

On­line re­tail­ers shipped 8-9 lakh prod­ucts a day in March this year, with Flip­kart, Ama­zon and Snapdeal ac­count­ing for about three-fourths of the ship­ments, the es­ti­mates show. ShopClues and Paytm rank next. Flip­kart, Ama­zon and Snapdeal did not re­ply to spe­cific queries from ET on their ship­ments, mar­ket share and av­er­age or­der values.

The gains by Seat­tle-based Ama­zon, which launched in In­dia a lit­tle less than three years ago, fol­low ag­gres­sive investing in its lo­cal unit — CEO Jeff Be­zos has so far com­mit­ted to pump in at least $2 bil­lion in In­dia. Flip­kart and Snapdeal, mean­while, are forced to trim ex­penses and wean cus­tomers away from heavy dis­counts as they strug­gle to raise money from in­vestors at present val­u­a­tions.

A new el­e­ment has been in­tro­duced to the equation by the govern­ment’s ‘guidelines’ ear­lier this month on ecom­merce mar­ket­places. One of the main re­quire­ments is that no seller can ac­count for more than a quar­ter of sales on a mar­ket­place, and this could af­fect each com­pany dif­fer­ently – Ama­zon and Flip- kart have greater re­liance on large sell­ers but not Snapdeal.

Ama­zon has in­fused at least Rs 6,700 crore since Jan­uary 2015 into its In­dia unit, Ama­zon Seller Ser­vices, with over half of that amount be­ing in­vested since De­cem­ber. The com­pany has chan­neled a lot of that money into im­prov­ing the shop­ping ex­pe­ri­ence for cus­tomers in terms of de­liv­ery and af­ter-sales ser­vice, say in­vestors and an­a­lysts. Ama­zon is also ex­pected to in­tro­duce its suc­cess­ful Prime sub­scrip­tion pro­gramme in In­dia. “In 2015, we grew by more than 250% over 2014,” a spokes­woman for Ama­zon In­dia said in an email. “We are on a mo­men­tum to de­liver sim­i­lar lev­els of growth this year but on a much larger base.”

In terms of gross mer­chan­dise value, though, Mor­gan Stan­ley in a Fe­bru­ary re­port es­ti­mated Flip­kart’s mar­ket share at 45%, Snapdeal’s at 26%, and Ama­zon In­dia’s at 12%. The GMV met­ric re­flects the to­tal value of all the goods sold on a plat­form but does not fac­tor in dis­counts or re­flect the ac­tual com­mis­sions dig­i­tal mar­ket­places earn on those sales.

Even with those es­ti­mates, en­trepreneurs and in­vestors say this year will mark a height­en­ing of ri­valry be­tween Ama­zon In­dia and Flip­kart. Snapdeal is in­creas­ingly bet­ting on di­versi- fi­ca­tion to try to mon­e­tise its ex­ist­ing users by en­ter­ing into or part­ner­ing with other firms to of­fer ser­vices such as pay­ments, travel book­ings and food and gro­cery de­liv­ery that could bring re­peat trans­ac­tions. “We al­ready have more than 1 mil­lion users trans­act­ing across our plat­forms daily, which is more than Flip­kart and Ama­zon put to­gether,” said a spokesper­son for Snapdeal.

The bat­tle be­tween Flip­kart and Ama­zon has pri­mar­ily been in elec­tron­ics, in­clud­ing smart­phones, but the action is likely to shift to fash­ion where the for­mer has made sig­nif­i­cant head­way with Myn­tra that it ac­quired in 2014. Elec­tron­ics ac­counts for a large por­tion of ship­ments but fetch com­mis­sions of 2-7% whereas gross mar­gins in fash­ion can top 45-50%, ac­cord­ing to Mor­gan Stan­ley.

“We have clear lead­er­ship of the on­line mar­ket in In­dia with over 60% mar­ket share in three of the largest seg­ments — smart­phones, fash­ion and elec­tron­ics,” said a Flip­kart spokes­woman. “Our fo­cus will be to con­sol­i­date this lead­er­ship po­si­tion by con­tin­u­ing to build world-class cus­tomer ex­pe­ri­ence, in­no­vate re­tail in In­dia and build a tech­nol­ogy pow­er­house out of In­dia.”

Flip­kart, un­der Binny Bansal, is pulling re­sources ur­gently to im­prove cus­tomer ex­pe­ri­ence. Saiki­ran Kr­ish­na­murthy, who heads the ser­vice prod­uct group in­clud­ing af­ter-sales ser­vices, was in March given ad­di­tional charge of Ekart, Flip­kart’s lo­gis­tics unit, to im­prove cus­tomer ex­pe­ri­ence by mak­ing the two di­vi­sions work to­gether.

Mor­gan Stan­ley es­ti­mates In­dia’s on­line re­tail mar­ket, in­clud­ing de­liv­ery of food and gro­cery, will be worth $119 b by 2020

43% 14% 19% 37% 21-24% 14-15%

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