Will Amazon continue to #deliverthelove in India?
Anita Rao Kapur
Senior Insights leader | Strategy & Growth Consulting | Champion for Gender Equality in the Workplace
The battle lines are being drawn as the three largest retail players of the world – Amazon, Walmart and Alibaba, get ready to fight for a share of the Indian mind, heart and wallet. May the odds be ever in their favour….and let the games begin!
If the news brewing over the past couple of weeks is any indication, the world's retail giants are getting ready to play in India. On one hand, Walmart is rumoured to be making a bid for as much as a 40% stake in Flipkart. On the other hand, Amazon and Alibaba continue to push ahead with a bullish view of the market. Jeff Bezos is committed to ‘keep investing’ his promised $5 billion in India, expanding Amazon’s Prime content and services. And Alibaba, already a significant player in the market with its share in Snapdeal and PayTM, is further cementing its commitment to the market with its recent investment in the online grocery group BigBasket.
The emergence of India as an eCommerce battleground isn’t entirely surprising. With more than 2/3rds of the population below 35 years old, near-universal smartphone ownership among those with internet access (84% as per Kantar TNS Connected Life 2017) and rising affluence, the size of opportunity is evident. So even though only 41% of connected Indians shopped online in 2017, well below the APAC average of 65%*, the market is worth approximately $34.2 billion in 2017**.
This of course, won’t be the first time that Walmart and Amazon are at loggerheads. Competition between the two retailers peaked when Walmart acquired US eCommerce startup Jet.com for $3.3 billion in 2016 and Amazon acquired the brick and mortar Whole Foods business for $13.7 billion in 2017 . But acquisitions aside, Kantar Millward Brown’s BrandZ** index reveals that Amazon’s 'Power Score’ - its share of consumer demand based on brand associations – also grew by 44% between 2011 and 2016, moving it from third place behind Best Buy and Walmart to number one in the retail category by 2016. It has since grown a further 41% in financial brand value last year.
Amazon has seen resounding success in India too. On the back of a highly localised business model, it quickly took share from the then (local) market leader, Flipkart. Amazon India’s BrandZ Power Score grew even faster than in the US, a staggering 65% growth between 2015 and 2017. A customized business model - cash on delivery, an army of suppliers, mom and pop stores as delivery centres and an impressive content lineup on Prime Video have all played a critical role. But the real win for Amazon has been a made-for-India narrative to build a meaningful connection with the consumer. It has successfully translated their global brand purpose to a voice that is authentic and fiercely Indian – promising access, inclusion and a chance to bring your dreams to life – to create ‘apni dukaan’ (my own shop) that caters to the needs of every Indian. Despite a first mover advantage and aggressive price discounts, Snapdeal and Flipkart seem to have stumbled during this period, with their brand differentiation*** eroding over the past two years.
Slowing growth, greater regulatory pressures and the speed of social change means that legacy will not count for much in India. With their US business stabilizing, will Walmart’s renewed ambition to break into India prove to be just what Flipkart needs to get back to growth? Or will the sleeping giant Alibaba, with its history of disruptive innovation and an inherent understanding of the Asian consumer’s needs, manage to tap growth in unexpected ways? Irrespective of how the chips fall, one thing is certain. The winner will need to crack the code of this complex, fragmented market to deliver both a business model and a consumer proposition that is unique, relevant and disruptive… all at the same time!
*Kantar TNS’s Connected Life is an annual study that maps evolving digital behaviour across 70,000 consumers in 56 countries.
**Kantar IMRB, Digital Commerce Study 2016.
***Kantar Millward Brown’s BrandZ™ is the largest global brand equity platform covering over 100,000 brands across 45 countries.
CEO Factworks India Private Limited
6yNice article. Some thoughts - 1. Without getting into what the papers say about Walmart and Flipkart, I think there is a misconception that Flipkart needs anyone's help to 'get back to growth'. Given the nature of the business, the actual numbers or pace of growth cannot be disclosed to the world. Thats why there is often a lot of speculation about Amazon's rise and inevitable erosion for Flipkart! It has almost become an obsession of sorts among a section - it is difficult for them to fathom how a homegrown brand can be a giant slayer! Note that every industry source worth its money has already confirmed that in the last few years, Flipkart has always maintained significant lead over AZ and last year definitely widened it. So either we grew or Amazon degrew :) In fact we should be given a lot of credit for ensuring that sort of margin despite Amazon's marketing blitz and 'Apni Dukaan' :)) 2. Smartphone penetration is far from 84% in India. In fact it isnt even close to half that mark unless you are talking about Metros alone. Even then 84% is a huge stretch. There is an ongoing effort to shift more people to smartphones. But that isnt happening, thats why players like Jio are coming up with 4G enabled feature phones.
Good points. I think underlying all of their success is also the fact that they are touching on a lot more demand moments than their competitors. Their ecosystem is simply more robust and end-to-end. The localized business model builds on this strength. Personally I feel their next big play in India above all and ahead of every competitor will be Amazon Health purely on strengths of trust and reach knowing that this is an underserved sector in India
Analytics & Insights APAC
6yThe game has just begun. Amazon may have the lead right now but Walmart’s entry through an established local player will bring in the right flavour to this landscape. It will be interesting to see how each player ups the game beyond price to woo consumers.