Battle Cry

Written by Anushree Bhattacharyya | New Delhi | Updated: Aug 12 2014, 07:20am hrs
E-commerce poster boy Flipkart left the market in a tizzy last month, after it raised $1 billion (over R6,000 crore) in fresh funding from investors. One of the largest investments so far in the competitive online shopping segment in the country, with this fresh infusion of funds, Flipkart is valued at about $7 billion (around R42,000 crore). Our investors recognise that e-commerce is a long-term game and are aligned to our plans and have complete faith in our abilities, said Sachin Bansal, co-founder and CEO,

And even as the dust was yet

to settle, came the news that Amazon, the worlds largest e-commerce company, was investing

$2 billion in the Indian market.

In a statement released by the

company, Jeff Bezos, chief executive officer, Amazon said, With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India. At

current scale and growth rate,

India is on track to be our fastest country ever to a billion dollars in gross sales.

With the two e-commerce biggies declaring war, analysts believe that at the end of the day its a win-win situation for all. According to a recent study by Technopak, a management consulting firm, the Indian e-tailing market which is currently pegged at $2.3 billion is expected to reach $32 billion

by 2020. These are good times

for the e-tailing business in India. The promise of total investment

of $3 billion proves that e-commerce has acquired serious overtones in the country. This kind of investment will not only help the e-tailing business to grow, even the retail business will benefit from it in the long run, said Ankur Bisen, senior vice-president, retail and consumer products division at Technopak.

Niche players too have nothing to complain about. According to Supam Maheshwari, CEO,, while the announcement is definitely about the show of might ultimately everyone is

expected to reap the benefits.

Both the players will work towards further establishing the

category. This will also help in gaining consumer trust and more and more consumers will join the e-commerce frenzy, he added. which sells baby products online also has a

chain of retail stores across the country. The e-commerce player plans to increase the number of its stores from 70 to 100 by December this year.

Agrees Ashvin Vellody, partner, management consulting, KPMG in India, who says that for both Flipkart and Amazon, the next two to three years will be crucial as most of the funds raised will be used to create a stronger e-commerce base in the country. From building consumer base to helping consumers in making a purchase decision and creating a strong network for delivery of products -- all these will benefit from the fund infusion. In the next two or three years both the e-tailers will be working towards bettering the products and services offered by them, said Vellody.

Things to do

To begin with, Flipkart expects to reach $2.5-3 billion in sales in the next one year while Amazon is targeting $1 billion in sales this fiscal in addition to increasing its market share by 30%. Flipkart surpassed the $1 billion mark in gross merchandising volume in March this year.Our success in the last year has shown that our investments in the last one year have worked. So we will continue to make investments in increasing selection for customers, both categories and depth within these categories; helping our sellers grow with investments in various services such as innovative delivery models and trustworthy online shopping experiences, said Amit Agarwal, vice president and country manager, Amazon India.

Therefore as a first step in their effort to woo consumers, both Flipkart and Amazon plan to increase their seller base. While Flipkart is looking at increasing its seller base to 12,000 by March 2015, Amazon Indias merchant base has grown to 8,500. And thats not all. Both the e-tailers are also looking at introducing new categories in addition to consolidating the existing ones. We want to have anything and everything on Flipkart. In the next 18 months, we will be launching new categories across segments. We recently launched large appliances, which we will scale up. We have huge plans on category expansion, said Flipkart's Bansal.

Whats more, despite enjoying a strong presence in the fashion and lifestyle category through Myntra which it recently acquired, Flipkart will focus on strengthening the lifestyle category on its portal. For Flipkarts Bansal, fashion is going to be the biggest category in the next three-four years. Although it is a more difficult category to sell than electronics, if you can create the right solution for it, we believe it can really scale up. We strongly believe that we will have the right answers for the Indian market and we will innovate and do whatever it takes to make that happen, he said.

As for Amazon India, books, consumer electronics, baby products, shoes and watches are going to be four important categories for growth. Today our selection across categories is in excess of 17 million products. We already have the largest selection across books, music, video games, toys, home and kitchen, sports, fitness and outdoors, luggage and backpacks, fashion jewellery, beauty products and mens innerwear, added Agarwal .

According to Bisen, while the existing categories such as electronics, fashion and lifestyle and books will continue to be the driving force, the e-tailers are expected to broad base through finer dissection of the existing categories. For instance, in case of apparel as a category one can divide it into various sub-categories such as western wear, ethnic wear, etc. Then ethnic could be further broken into saris, kurtas, kurtis, etc. We will see the mushrooming of finer categories in the near future, he added.

Additionally, an exclusive deal with brands is also expected to play a more prominent role in the future. Flipkart was the first e-tailer to take the plunge in India, when it started selling Motorola smartphones early this year. The e-tailer sold a whopping million-plus smartphone handsets in the five months since it started selling in India. Realising the potential of such deals, Amazon India too lapped it up and currently sells a variety of products on its portal as part of exclusive deals signed with sellers and brands. We have thousands of brands and small and medium enterprises (SMEs) that are willing and excited to use the Amazon India marketplace to reach to consumers nationally. They understand and appreciate the value that our brand stands for. Several sellers and brands have exclusive association with us, said Agarwal. For example, Philips just announced the availability of the new Philips Disney Imaginative Lighting range for kids exclusively on Similarly, in mobiles it has exclusive launch deals with Samsung for the Samsung Galaxy K Zoom, Karbonn, Lava, XOLO, OPPO mobiles , etc. We are also the exclusive online partner for KitchenAid, a premium kitchen appliances brand from Whirlpool, for Waterlily LA, a premium leather handbag brand as well as for Da Milano and Tommy Hilfiger, he said.

KPMG's Vellody agrees that exclusive deals are expected to play an important role in attracting consumers. An exclusive deal gives the advantage of exclusivity against competition, he added.

Even as Flipkart and Amazon continue in their efforts to outrun one another, sooner or later it is the consumer who is going to benefit from this battle. In their bid to acquire new customers, retain the older ones and ensure repeat purchase, both the sites are expected to rely heavily on deals and discounts, which will be offered from time to time. For instance, Flipkart recently launched a limited period scheme for Motorola handsets. Under the scheme, Flipkart has slashed the price of Moto G handsets by R2000 and is currently selling the smartphone for R10,499 . As per Amazons Agarwal, the e-tailer plays no role in deciding the price of products and services. We are a marketplace and our sellers determine the prices. We offer them services such as Fulfilment by Amazon that help them reduce their capital expenditure allowing them to pass those benefits to their customers, he said. Presently both the e-tailers run a scheme called deals of the day under which the sites offers various discounts and deals everyday on select products and services.

Vellody of KPMG says that the price war which has played a significant role so far and has helped in acquiring new consumers will continue to do so even in the future. There are a couple of reasons why a customer shops online. For example, availability of popular products at a cheaper rate. And given how prudent Indians are in their buying decision, price still is the de facto decider, he added.

Part of the funds pumped in will also be utilised to build brand awareness amongst consumers through the use of various media verticals. If Flipkart created a strong recall through its earlier campaigns, where children posed as adults, Amazon too rode on cricket tourney Indian Premier League (IPL) to create the right amount of buzz. Flipkart is no longer a niche online seller catering to the needs of internet users. With the e-tailing brand going through a transition, the story-telling too has evolved, said Kartik Iyer, CEO and co-founder, Happy Creative Services.

However, in the mad rush to catch the bus, the e-tailers are also expected to blow up some of the cash. With both the parties expected to use digital extensively, most of the money will be spend in bidding for ad-words on Google, added Maheshwari of

Behind the scenes

Interestingly, apart from building catalogues by adding new categories and sellers both the e-tailing companies are also expected to concentrate on strengthening back-end operations through addition of new warehouses. So Flipkart which has half a dozen warehouses at present plans to open more in tier two and three cities in the next three years while Amazon recently announced its plans to open five new warehouses taking the count to seven. Amazon plans to open the new warehouses in Delhi, Chennai, Jaipur, Ahmedabad and Tauru (outskirts of Gurgaon). We wish to take Flipkart to the next level by pioneering technology and supply-chain innovations that will change the face of online shopping and one day make us one of the biggest Indian companies on the global map, said Bansal.

Moreover, after sales service is yet another area, where the e-tailers are expected to up their ante. For example, last year, after Flipkart launched guaranteed one day delivery service, Amazon India too introduced the service in select pincodes across several Indian cities including Bangalore, Mumbai, New Delhi, Ahmedabad, Hyderabad and Pune. To enhance customer experience by reliable and quick deliveries to more than 275 cities we launched Amazon Easy Ship for sellers. Orders are picked up directly from the seller's location by an Amazon logistics delivery associate and delivered to the buyer's location with minimal effort from sellers. Customers get track-able shipments and faster and predictable delivery time. Launched in 20 cities earlier this year, in just three months nearly 4000 sellers have used it, added Agarwal. This year too began with Flipkart announcing a subscription-based service for its customers called Flipkart First in May. Under the service it offers a host of exclusive benefits to its loyal set of customers. Next, it launched the scheduled delivery service in four cities including Bangalore, Delhi, Mumbai, and Kolkata a month later in June.

Next, deeper penetration by expanding reach to tier two, threee and four cities and towns is another task that lies ahead for both the parties. Agarwal of Amazon India says that the e-tailing site has got stupendous response from smaller cities and towns. We are very happy by the response that we are seeing from mini metros and smaller towns across India, he added. Amazon India currently uses the India Postal Services (IPS) network to service over 19,000 pincodes through 140,000 post-offices across all 35 states and Union territories in India.

Vellody of KPMG points out that while metros and mini-metros still contribute to a large chunk of the revenue of e-commerce players, with an increase in use of number of smartphones smaller towns are expected to catch up fast.

Analysts believe that most of the new skills will be attained through the acquisition of several companies working in the space of procurement, logistics, data analytics, etc, in the future. So, if on one hand, Flipkart claims to be actively looking at acquisitions across supply-chain, technology and seller enablement, Amazon India is also ready to play fetch. Considering that there will be more than half a billion internet users in the country in the next four to five years, it means that a lot of commerce and shopping will move online. Our main focus will be to build and strengthen the overall e-commerce ecosystem, said Bansal of Flipkart.