Is Amazon lagging Flipkart in introducing local innovations?3 min read . Updated: 09 Nov 2017, 05:13 AM IST
Amazon India needs to implement another round of customization and India-specific services to maintain its flying sales growth, say analysts
Bengaluru: More than four years after launching, online marketplace Amazon India needs to implement another round of customization and India-specific services to maintain its flying sales growth, analysts said.
Until late last year, Amazon (Amazon Seller Services Pvt. Ltd) looked like it was running away with the e-commerce market before an unexpected comeback by local rival Flipkart.
Now, as the market has shown sluggish growth for the second year in a row, Amazon has lagged Flipkart in introducing business innovations. Over the past 18 months, Flipkart has introduced schemes such as no-cost EMI (equated monthly instalment) and product exchange offers that have helped the company differentiate its offering from Amazon’s.
Months after Flipkart introduced these schemes, Amazon launched them on its own platform but analysts say that of late, the company has been found wanting in introducing incremental innovations compared with Flipkart.
Amazon launched in India only in June 2013, years after Flipkart (2007) and Snapdeal (2010). But after losing out in China to Alibaba Group Holding Ltd, the company ensured that it customized its offerings to suit the tastes and habits of Indian customers. It offered cash-on-delivery—the preferred mode of payment in India, cut the size of its mobile app to suit cheap smartphones that have low storage and little computing power, redesigned its daily deals offering, and tied up with local partners such as India Post to reach far-off areas in the hinterland, among other measures. On the back of such measures and fuelled by an unprecedented cash splurge, Amazon quickly became the biggest threat to Flipkart.
Now, the company needs to find innovations that appeal to the next set of Indian customers who are buying things online for the first time.
Some experts tracking online retail in India pointed out that while Amazon will come out with more India-specific innovations over the next few months and years, the online retailer needs to be realistic about the size of the e-commerce market in India and its near-term growth prospects.
“On the face of it, Amazon’s business in India is very different from what they have in their home market in the US. Everything they’ve done in India till now is very India-specific—take a look at Prime, for example. In the US, Prime membership is priced at $100 whereas in India, they are giving away subscriptions at a throwaway price of $8. While they will continue rolling out India-specific initiatives, they will be aware of the fact that the Indian e-commerce market is not like China’s, which is much larger in size and is growing at a much faster pace. The potential for innovation in India is also limited, considering the fact that the market is still very small and things are moving at a much slower place—so, consumers will also take time to adapt to e-commerce and newer innovations. Amazon should be happy with the way things are right now—India is not a winner-takes-all market and there is enough room for two players. Amazon and Flipkart are both very well-funded and their battle will be too close to call over the next five years. There’s no need for Amazon to do too much more than what they are doing now," said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.
Amazon said it is working on filling customer demand gaps.
“We don’t look at it as India-specific initiatives—we look at what customers locally want and how to serve them," said Amit Agarwal, senior vice-president and country manager at Amazon India. “You look at the gaps and you look to fill those gaps. We see a lot (of gaps). For bringing sellers online, we invested in Chai Cart, Tatkal, etc. For giving sellers logistics to run their business without having to ship inter-state, we created Seller Flex. Our entire Amazon Pay initiatives are about removing friction (in digital payments). These are all local innovations."
Agarwal said Amazon is betting big on consumer credit and local language content to drive growth.
“When you go to the next 50-100 million customers, you realize that their disposable incomes are much less and you realize that you need to provide them credit and financing because that’s how they afford more. And going forward, languages become an issue—so that’s why more than 50% of our customer service is in vernacular (languages). So, all of these are innovations and that will continue," Agarwal said in an October interview.