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Business News/ Companies / Start-ups/  March madness for Flipkart, Snapdeal, Amazon India will soon blow over
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March madness for Flipkart, Snapdeal, Amazon India will soon blow over

The annual Diwali shopping season pits e-commerce giants like Amazon India, Flipkart and Snapdeal against each other for which the stakes are more than just bragging rights

If Flipkart’s Best Big Billion Day or Amazon’s Great Indian Festival Sale are any guide, frenzied discounting is alive and well. Photo: Pradeep Gaur/MintPremium
If Flipkart’s Best Big Billion Day or Amazon’s Great Indian Festival Sale are any guide, frenzied discounting is alive and well. Photo: Pradeep Gaur/Mint

Taipei: Think of it as the college basketball championship of Indian e-commerce, or an autumnal version of March Madness.

The annual Diwali shopping season pits the country’s internet retail giants against each other in a week-long battle for which the stakes are more than just bragging rights.

Despite trailing in the rankings, the odds-on favourite to take this year’s Diwali Festival Online Retail Crown is Amazon India. Coach Jeff Bezos, and his point guard Amit Agarwal, have put in an incredible off-season and are looking set to upset reigning champion Flipkart and smaller compatriot Snapdeal.

As private equity partner Haresh Chawla told Bloomberg News: “This season could decide who’ll be the ultimate winner."

Diwali, known as the Festival of Lights, runs from 28 October to 1 November this year. Like Christmas in the West, or Chinese New Year, the celebration is an excuse for retailers to bombard innocent bystanders with guilt, enticement and discount-bribery. The only real way to celebrate Durga Puja is by enjoying 70% off Durga Puja saris, and nothing says you care like buying auntie a Micromax smartphone (at 40% off).

Except that to think any self-respecting Bengali woman would ever buy a sari online for her community’s biggest annual bash borders on blasphemy. They’d want something unique, bought from a shop introduced by her mom. Such is the challenge of e-commerce.

That’s not stopping the e-tailers from marshaling their resources—well, their investors’ cash—to blanket the country with billboards, print and TV ads, Bloomberg’s Saritha Rai reports. On form alone, by which we mean $5 billion in cash, Amazon looks set to go all the way.

Also Read: Snapdeal sellers cross Rs37-crore sales mark on day 1

The statements from rivals on the first day make the event sound like an NCAA-style elimination contest.

With estimates that one-third of India’s annual online sales come during Diwali season, and each of the players burning cash just to survive, investors are watching closely to decide whether to keep betting on their favoured Bruins (played by Amazon), take another punt on the Wildcats (Flipkart) or just walk away and look for another tourney to sink their money into.

Right now just 1% of Indian retail is online, compared with 10% in China. Sure, that means a lot of upside, but there’s also much standing in the way of e-commerce going mainstream, such as immature payments and distribution systems.

So far, investors in the big three have thrown $11 billion on the table. Yet as any gambler knows, betting is only worthwhile when the pay-off is sufficient. It’s just not clear that the Indian online retail pot will grow lucrative enough to justify players continually upping the ante.

Also Read: Amazon bets on Diwali sales to become dominant online retailer in India

It’s not even clear who’s paying for the markdowns. India’s new e-commerce rules say that marketplaces backed by foreign investment will behave like middlemen and not influence the sale price of the merchandise. But if Flipkart’s Best Big Billion Day or Amazon’s Great Indian Festival Sale are any guide, frenzied discounting is alive and well. The path to profitability for the online industry as a whole is going to be just as long and arduous as it was before the new rules kicked in earlier this year.

Next year, there will be one more vexing change in regulations. After India adopts a goods-and-services tax, e-tailers will have to deduct the levy from every payment they make to thousands of suppliers. Vendors will then have to claim tax credit on their input costs. The thin margins on which the latter operate could get squeezed further, limiting their ability to participate in big-ticket discounting.

Most importantly, for all e-tailers’ attempts at changing habits, customer loyalty remains fickle. Once online sales end, the country will go back to bricks-and-mortar stores to do their real Diwali shopping. Just like the NCAA’s March Madness, a short-term frenetic competition makes for great buzz, but once the tournament is over it’ll be time for the kids to leave the court and let the adults play. Bloomberg

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Published: 04 Oct 2016, 09:01 AM IST
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