Flipkart vs. Amazon – Let the Games Begin!

Ecommerce in India may be a roaring industry today, worth billions of dollars, with the top dogs such as Amazon and eBay participating, taking on the entrenched local champions, Flipkart and Snapdeal. It is a super competitive industry with the executives fighting it out like gunslingers from the Wild Wild West. But the leaders of the pack are undoubtedly Flipkart and Amazon – the new kid in town.

Let’s Get Ready To Rumble

So, Flipkart vs. Amazon, what should you choose? Well, both Flipkart and Amazon are led by hyper aggressive, competitive, workaholic CEOs obsessed with success and the idea of winning. Everyone knows about Jeff Bezos, the man needs no introduction, perhaps the most visionary CEO of his generation.

People may not know much about the much younger Sachin Bansal and Binny Bansal, the men who run Flipkart. The Bansals are great admirers of Bezos and Amazon as well as one of the Seattle giant’s biggest global rivals. It’s a fight to the finish, make no mistake about that.

So, how do they stack up as of now? Well, Flipkart is clearly dominant in India, with a 44% share of the ecommerce market worth $6.3 billion in 2013. Amazon only made its entry into India in 2013, so are late starters – and yet, they have already hit $1 billion in sales and achieved a market share of 15%, which puts them just behind Snapdeal and at no. 3. Not bad at all, because Amazon also has the fastest growth among all ecommerce companies in India.

Flipkart was founded by the young Sachin and Binny Bansal in 2007. They were both graduates from the famous IITs and ironically had their first job at Amazon, before deciding to strike out on their own. They planned to start an e-commerce comparison website, but decided they had a better chance starting an ecommerce business themselves as back then there were no serious ecommerce players in India.

[See: Indian Startup Culture]

And thus Flipkart was born. Flipkart was a sensational hit with the Indian customer, who had no prior experience of ecommerce. They simply couldn’t believe that they could have books, DVDs, smartphones and more delivered to their doorsteps just by placing an order on the internet – India was virgin territory for ecommerce and Flipkart took full advantage of it. Flipkart was soon the hottest company in India with venture capitalists from all over the world fighting for a chance to invest in Flipkart.

How is Flipkart doing today, now that India is a relatively mature ecommerce market with several other companies involved, most significant of them, of course, being Amazon? Mukesh Bansal, the company’s head of e-commerce says their first mover’s advantage is still very much on. He adds, “Flipkart as a brand has very high consumer interest. It is the most trusted online retail brand in the country. We have deeper understanding of consumers. Between Flipkart and Myntra, it would be more than 50 per cent market share of all consumer transactions in India.” (Myntra is an e-retailer that was recently acquired by Flipkart.)

But it is clear that Flipkart is under threat. The business model that served it so well is copied by several players in the industry. And in Amazon, it has a most formidable competitor which has a fantastic brand name and one that is not afraid to spend an extraordinary amount of money on marketing in India. In fact Amazon’s highly imaginative TV commercials are a huge hit in Indian homes already, which has created a great curiosity about the company even among those who had never really bought anything on the internet before.

Amazon has adopted a strategy of selling things cheap – as cheap as possible – so as to force Flipkart to cut prices as well, and consequently bleed Flipkart. They’ve also cut commissions for those who sell electronic devices. Amazon, of course, is one of the biggest companies in the world, has infinite reserves of capital and can afford to carry losses. Flipkart – a young Indian company with no serious backup- cannot afford such luxuries. It’s really about whether Flipkart has the stamina to weather the brutal attack from Amazon.

The odds may be against Flipkart, but they are certainly not giving up without a real fight – Flipkart has raised $2.3 billion in capital this year and is building up its own cash reserves, to gear up for what promises to be a real battle ahead. Jeff Bezos has already pledged to invest $2 billion in Amazon India.

Going ahead, the battle between Flipkart and Amazon will be about who offers a newer and better selection of products and services, a faster delivery and at the lowest prices. There is also a competition between the two companies to gather as many sellers as possible. Amazon has 100,000 sellers all over India and Flipkart has 30,000. Flipkart aims to have 100,000 sellers by the end of 2015 as well.
Both Flipkart and Amazon have adopted a strategy to take every single cost element out of the equation, to lower the price ruthlessly through discounting and to do so for the long term, so as to bleed the competition. Who sustains this for longer will be the one to win the gun fight.

Flipkart is still the market leader and comes up with fresh ideas every so often, so it is still very much in the game. But Indian ecommerce is unforgiving and ruthless, and even a single mistake may cause funds to dry up. Amazon, on the other hand, has access to all the capital in the world and is happy enough to play the waiting game, hoping for Flipkart to make just that little slip.