Online retailer Amazon India has caught up with arch-rival and India’s leading e-commerce firm Flipkart in terms of popularity and brand recall among consumers, according to a survey published by research firm RedSeer Management Consulting Pvt. Ltd.
According to the latest edition of the RedSeer E-tailing Leadership Index (ELI), Flipkart and Amazon were both locked at the top of the rankings with a score of 95. The latest rankings underscore the threat that Amazon poses to Flipkart’s leadership in the $15-billion e-commerce market, despite the latter’s improved performance over the past six months.
According to the ELI report, while Flipkart continues to enjoy its leadership status in terms of popularity among consumers, it conceded ground to Amazon on key metrics such as overall brand performance during the January-March quarter. While Flipkart lost some points on overall brand performance, Amazon covered significant ground in areas such as customer satisfaction, as metrics such as net promoter score (NPS) show.
Amazon is also breathing down Flipkart’s neck on other key parameters such as gross monthly sales: currently, Flipkart’s monthly gross sales, on average, are Rs2,800-3,000 crore, while its monthly burn rate is around Rs300 crore, Mint reported on 12 April. Gross sales don’t account for product returns. The numbers include sales at the two Flipkart-owned fashion retailers, Myntra and Jabong.
According to executives directly familiar with the numbers of both firms, Amazon currently lags Flipkart on monthly gross sales, but it is catching up fast.
A key part of Amazon’s resurgent performance over the last quarter is its Prime loyalty programme. Mint reported on 14 April that the Amazon Prime membership programme has become an important lever for the company in its battle against arch-rival Flipkart, accounting for nearly 30% of all orders on Amazon India.
“We’ve seen a big rise in frequency as well as a big lift in actual order values from Prime customers,” said Akshay Sahi, head of Amazon Prime.
Flipkart, too, has a loyalty service but the company isn’t pushing it as aggressively as Amazon. Flipkart executives say privately that most Indians are unlikely to take to Prime and are not inclined to pay for delivery and convenience or content.
RedSeer surveyed some 9,000 online shoppers in 30 cities, tracking prices of various items across India’s top five e-commerce firms, which include Paytm and ShopClues.
Other top online retailers such as Paytm and Snapdeal continued to lag the leading duo of Amazon and Flipkart—while Snapdeal’s ratings remained largely unchanged, Paytm saw a dip in rankings, due to a poor performance in the quarter in areas such as delivery and post-delivery experience. Snapdeal’s score came in at 80, while Paytm came in at 79. ShopClues, and eBay India, which was acquired by Flipkart earlier in April, brought up the rear, with scores of 70 and 68, respectively.
The survey considered three broad metrics: trust in a brand; product assortment and prices; and the overall buying experience in terms of ease of using the e-commerce platform, delivery speed/consistency of orders and ease of product returns or cancellations. After weighing all of these factors, an overall score was assigned to each firm. The index reflects reports in Mint and other publications over the past six months.
The latest rankings come on the heels of Flipkart’s mammoth fund-raising of $1.4 billion earlier in April—arguably the most significant funding event in the history of the Indian start-up ecosystem, as billions of dollars of investment into India’s consumer Internet economy from global investors such as Tiger Global Management, DST Global, Naspers and Accel Partners are riding on the outcome of defining market-share battles between Flipkart and Amazon on one hand and Ola and Uber on the other.
Strategic investors led by Tencent, eBay and Microsoft participated in the latest fundraising, the largest in the history of Flipkart and India’s fast-growing start-up ecosystem.
Flipkart has previously raised $1 billion in 2014 from existing and new investors such as Tiger Global, DST Global and Accel.
In a recent interview with Mint, Amazon India boss Amit Agarwal indicated that Amazon was in India for the long haul and did not care about short-term rankings.
“I’m a runner. When you run (a marathon), you don’t check after 10m and see if you’re ahead. If you do, then it’s going to be a very long race for you because you might trip,” says Agarwal. “You can’t get satisfied or depressed with a relative metric.”
India’s leading retailers are currently trying to reduce their reliance on major categories such as smartphones, large appliances and fashion—which remain the three most popular categories for online shoppers—and are trying to make a foray into emerging areas such as groceries and furniture, which they feel could become multi-billion dollar segments in the future.
“What we’re seeing is that the other categories are growing faster than mobiles. So over the next two to three years, we see mobile being a much smaller part of the portfolio than what it is now (with fashion, large appliances, furniture and groceries growing faster). Mobile has a penetration of 30%. The other categories have a penetration in the low to mid-single digits. So there’s a lot of room to grow. For today, fashion, large appliances and mobiles are the three main categories. Two years from now, we want furniture and groceries to also become core categories,” said Binny Bansal, co-founder and group CEO at Flipkart.
More significantly, the likes of Flipkart are also trying to ensure that future growth happens at lower costs, as investors push leading consumer Internet start-ups to focus on metrics such as profitability, amid a broader slowdown in the growth of online retail in India.
“Overall we are looking at improving profitability and margins, and reducing costs within every BU (business unit). One, we are investing a lot in automation and AI (artificial intelligence). So, we are equipping all our operations managers, category managers with much better tools and much better insights from the data side to make decisions,” said Bansal.
The ELI survey also indicated that overall customer satisfaction for e-commerce has inched upwards since the festive season sale and the impact of demonetization late last year.
“The overall industry NPS has moved upwards, as a cyclic consequence of improved business delivery in the post festive season sale lull. Historically, NPS moves inversely to GMV as companies find it operationally easier to service the customer demand,” RedSeer said.
The next 12-18 months are widely expected to be a make-or-break period for Flipkart, which now has to deal with the dilemma of balancing discount-driven sales growth and cut costs at the same time, even as Amazon breathes down its neck. Under CEO Kalyan Krishnamurthy, while the e-commerce firm has shown signs of a resounding turnaround and a return to its heydays, it remains to be seen whether this turnaround is sustainable.