Amazon, Flipkart may face tough challenge in 2020 as Reliance firms up plans3 min read . Updated: 29 Dec 2019, 10:20 AM IST
- Reliance's likely entry into e-commerce by Diwali next year will bring in massive competition for both Amazon, Flipkart
- Online retailers in India recorded ₹19,000 crore worth Gross Merchandise Value (GMV) sales between 29 Sept and 4 Oct, market research firm RedSeer Consulting said
NEW DELHI : With more and more Indians taking the online route to fulfill their shopping needs, e-tailers like Amazon and Flipkart are witnessing high demands, including from far-flung and remote areas, but overall slowdown and negative sentiments - coupled with the new e-commerce policy and the likely entry of Reliance into the e-commerce space soon -- may spoil the 2020 party for the market leaders, say industry experts.
The later part of 2019 was not all that bad for Amazon and Flipkart as festive sales brought in record revenue for both the companies.
Online retailers in India recorded $3 billion ( ₹19,000 crore) worth Gross Merchandise Value (GMV) sales between September 29 and October 4, according to Bengaluru-based market research firm RedSeer Consulting. Flipkart and Amazon's combined sales held 90% of the market share.
A report by Forrester Research also predicted e-retailer sales to hit nearly $4.8 billion during the overall festive season.
Walmart-owned Flipkart claims it has over 60% market share in the Indian e-commerce market while Amazon is believed to have about 30% market share.
Despite facing regulatory hurdles in early 2019, Cloudtail India, which is the single-largest seller on Amazon India, reported revenue growth of 25% for March 2019 quarter.
Cloudtail is owned by Prione Business Services, a joint venture between Infosys founder N.R. Narayana Murthy's Catamaran Ventures and Jeff Bezos' Amazon.
Catamaran, which owns 76% in Cloudtail India, is now being headed by ex-Infosys CFO Ranganath Mavinakere, Murthy's all-time favourite.
According to Satish Meena, Senior Forecast Analyst with Forrester, 2019's initial months were severely impacted by the new regulation fears.
"There has been an overall slowdown amid negative sentiments in the e-commerce sector. The sales did pick up in the festive season but overall, it has not been a great year and you will see cut in the 2019 growth forecast percentage for the Indian ecommerce industry," Meena told IANS.
"Profitability is still a concern for the big players. There have been investment in certain new categories but nothing much has changed this year," he added.
Reliance's likely entry into the space by Diwali next year will bring in massive competition for both Amazon and Flipkart.
"The discount-driven approach which Reliance has mastered reflects in whatever vertical they put their money into. They will likely enter the ecommerce space with the high-potential grocery segment near Diwali next year or may be later. Timeline is still a concern but they are coming big," said Meena.
Reliance Retail's entry into the online retail sector is the biggest challenge for Amazon and Walmart-Flipkart as the Mukesh Ambani-led behemoth is well positioned to create massive disruption in the market.
Reliance Retail operates 10,415 stores in more than 6,600 cities and towns, with 500 million annual footfalls - giving the company the kind of scale required to swiftly launch India-based operations.
Reliance Retail has already launched its food and grocery app for beta testing among its employees.
According to the India Brand Equity Foundation (IBEF), propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer wealth, the Indian e-commerce market is expected to grow to $200 billion by 2026.
The ongoing digital transformation in the country is expected to increase India's total Internet user base to 829 million by 2021.
Another big worry for Amazon and Flipkart is the new e-commerce policy that is still in the consultation stage. India has questioned Amazon's "predatory prices" and "deep discount sales".
"In the year ahead, it remains to be seen what shape the new ecommerce policy based on the recommendations of various industry stakeholders takes shape," said Prabhu Ram, Head, Industry Intelligence Group (IIG), CMR.
"The beneficiaries of the new e-commerce policy would potentially be small and bespoke e-commerce players, who could benefit from the level-playing field that the policy aims to provide," Ram told IANS.
The grocery segment is a big growth area in 2020.
"We have seen players like Grofers (backed by SoftBank, Tiger Global and Sequoia Capital) making inroads into the segment. Social commerce will be another big growth area in 2010. Facebook has also made investment in Meesho, a platform that enables Indian entrepreneurs to establish online businesses via social channels," said Meena.
"The viability of the existing and upcoming e-commerce players will be tested big time in 2020," he added.