The Holiday Battle Royale In India’s $27.5B E-Commerce Industry

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Children burn fire crackers outside their houses in New Delhi, India for the national holiday of Diwali . (AP Photo/Altaf Qadri)

The festive season in India starts with Ganesh Chaturthi and Onam around August-September, peaks during Diwali, and ends with Christmas in December. This period, which brings an increase in consumer spending also leads to a sales competition, especially amongst e-commerce start ups. Flipkart’s Big Billion Days (Oct 2 – 6), Amazon’s Great Indian Festival (Oct 1 – 5) and SnapDeal’s Unbox Zindagi (Oct 2 – 6) determine the perception of success or failure around their firms; they contribute to nearly 40% of these companies’ annual sales. Therefore these startups spend aggressively on advertising to make the best use of the biggest shopping event of the year.

The start of this year’s festive season has proved to be a bonanza for Indian customers, who have spent money on the top selling categories that include electronics, home appliances, fashion wear, furniture and home décor. The capital spent suggests an improvement in their purchasing power as compared to 2015; a result of an increase in disposable income from the increase in salaries and pensions of government employees due to 7th Pay commission and boost in earnings from a good harvest for those dependent on agriculture. To cater to the innately price sensitive Indian customers, the biggest e-commerce startups in India have launched new models and announced attractive tie-ups with consumer durable companies; HTC mobile phones will design an exclusive e-store on Amazon, and Google has plans to launch pixel phones via Flipkart later this year.

To form such tie-ups that have helped these firms gain market share, Flipkart, Snapdeal and Amazon have been rather elaborate in executing their plans over the past several months.

Amazon India, in its attempt to overthrow market leader Flipkart, has nearly tripled its sellers to more than 120,000 from a mere 45,000 at the end of last year. According to Gopal Pillai, general manager of seller services at Amazon India, out of the total number of sellers, 20,000 have joined in the last 5-6 weeks. To achieve this feat it has launched initiatives such as Amazon Tatkal, which allows merchants to come onboard in under an hour, and has reduced commissions for selling on its platform. Along with this expanded network of sellers, who have taken the total products listed on Amazon India to 80 million, in order to increase “repeat purchase” and retain loyalty with shoppers, it has launched a two-hour delivery service of daily essentials – Amazon Now and Prime Subscription Service that offers free one and two-day delivery. With an aim to reach out to 9 million potential customers, Amazon has also splurged $200 million (Rs 20 crores) on the opening ceremony of Indian Super League (ISL), which coincides with its Great Indian Sale. A statement from ISL broadcasters Star India celebrates this association and states: “Amazon is going beyond normal spot buys… We have never done such activation for any other sporting activity. No brand in India has leveraged any property like this so far.”

FlipKart, after acquiring Jabong for $70 million in July this year, plans to retain its 65-70% share in the high-margin online fashion market in India. It is looking to sell one out of every two units sold in the category. Flipkart Fashion boasts 60,000 brands, over 8 million listings and more than 100 million searches a month. The fashion vertical on Flipkart, before cancellations, does gross sales of $3.5-4 billion (Rs 350-400 crores) a month, accounting for 15-20% of the sales for the portal. It has invested in new fulfillment robots that are likely to boost efficiency in a sometimes chaotic supply chain and has introduced 7 am deliveries in 44 cities, with plans to extend the service to other cities. To meet the expected surge in shipment volumes during the festive season the startup will be hiring more than 10,000 temporary staff and has been offering an additional incentive of Rs 5 ($.075) per package for business partners delivering more than 45 packages per day as well as Rs 200 ($3) for their attendance on all key sale days.

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Snapdeal too has implemented a slew of initiatives to keep the employees motivated in their fight for market share against Flipkart and Amazon. The startup plans to have standup comedy sessions, Diwali Mela, live food counters, flash mob and jamming sessions in its office space. Saurabh Nigam, vice-president for HR at Snapdeal, wants employees to bring families to work on designated days. He further adds that “there will be monetary and non-monetary awards for top performers” all through the festive month of October. A few months back, Snapdeal launched an internally coded mission – “Project Darwin” – which directed the top 50 people in its management to roll up their sleeves for consumer research across 12 cities with a specific brief. The key observations during this process have proved to be vital in leading to insights that eventually helped with the launch of the re-branding of Snapdeal. The company has also started showcasing a new logo and a tagline – “Unbox Zindagi”. According to its founder Kunal Bahl, this third biggest e-commerce company wishes to capture “All the possibilities that open up when you open the box” and plans to spend a humongous $2 billion (Rs. 200 crores) which also includes festive spends over the next couple of months.

As the efforts of their hard work and planning have started bearing fruits, Flipkart, Amazon and Snapdeal have been touting statistics to prove their dominance during the Diwali sale. Amazon claimed a three fold increase in sales on its platform to more than 15 million orders, Snapdeal stated it’s fulfilled 11 million orders and Flipkart has retained the numero uno tag in this pack with 15.5 million completed transactions, which includes sales from Myntra and Jabong. These numbers suggest a development of a two horse race between Flipkart and Amazon, with Snapdeal losing its market share to 14% from 19% a year ago. While smartphones and televisions have boosted the value of goods sold by Flipkart to $500 million, Amazon has traded large amounts of daily consumables, including detergents, spices and groceries, with its Prime subscription service being its biggest selling product.

The implication of these performances in October will be noticed towards the end of festive season. It raises a possibility of a bumper funding round for Flipkart. The third placed Snapdeal, even after an expensive re-branding exercise and equipped with the largest number of sellers (300,000) will find it difficult to reclaim the second spot. As a silver lining in its defeat, Amazon has been able to mop up the regular shopping customer footfall via the Prime subscription service, raising a possibility of further assaults against Flipkart in its quest for domination of the $27.5 billion valued Indian e-commerce industry. Even though Flipkart has managed to dominate the opening round of this festive season, the victory has been far from a comfortable one. They owe their position to the combined sales of fashion portals Myntra and Jabong.

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