Game on: Flipkart and Amazon in 2014

Flipkart was launched in India in a manner that is uncannily similar to how Amazon started in the United States of America. First launching an inventory-led model offering books, CDs and the like, Flipkart rapidly moved to the marketplace model, presently offering products across a variety of categories like apparel, electronics and even homeware.

Not surprisingly, Flipkart is one of India’s largest online retail giants. Amazon entered the Indian market about two years ago, but Flipkart had already grown to be a tough competitor to this global player. In fact, recently there was quite a public display of rivalry between the two companies, when Flipkart put up posters proclaiming tis popularity on the travel route that Jeff Bezos took when he visited India.

So, how has this year been for Flipkart and Amazon?

Let’s take a look.

For Amazon, here’s a gist of their progress and plans:

Growth: Launched 24 new stores, expanded product offerings to 19 million and extended its total seller base to 16,000 in 2014. Amazon also invested to increase its storage capacity in India to half-a-million sq ft from 150,000 sq ft. The company set up seven new fulfilment centres – one each in Maharashtra, Karnataka, Haryana, Delhi, Tamil Nadu, Gujarat, and Rajasthan. Amazon.in also promises to provide same-day-delivery on nearly half-a-million products that it fulfils across hundreds of pin codes.

Amit Agarwal, vice-president and country manager of Amazon India says, “it has been quite an exciting year and, as a team, we are very humbled by the response from our sellers and customers alike. We remain committed to enabling more and more sellers, especially Indian SMEs (small and medium enterprises), to grow profitably in the new digital age and explore opportunities to provide them easy and cost-effective access to both domestic and global markets.”

Challenges:

It seems like Amazon India is having a bit of a tussle with government officials in states like Karnataka over tax and business regulation issues. This led to the government ordering Amazon’s vendors to remove goods from its warehouse in Karnataka. It seems like amazon will have to resolve these clashes with Indian government officials before expanding across India more aggressively.

Flipkart had a successful year as well:

Progress:  Flipkart received funding in three rounds -$ 210 million dollars + $1 billion dollars + $ 700 million dollars, helping it to grow tremendously. With the aim to ‘enable lakhs of sellers and entrepreneurs to do their business online’, Flipkart is investing in building technology and improving logistics, payments, packaging, cataloguing facilities. Flipkart also had exclusive tie-ups with brands like Motorola and Xiaomi, which proved to be very successful. This year over 50% of Flipkart’s traffic was through mobile – with majority of the traffic from tier 2 and 3 cities. The Flipkart Big App Shopping Days sale, which ran for five days exclusively on the Flipkart app was exceptionally successful.  It saw more than 2 million downloads and 70% of the transactions through mobile apps.

This year, services like Flipkart First and same day delivery were launched. These help customers to customize their deliveries as per their requirements.

Hiccups: As Flipkart has been investing heavily in marketing, it incurred losses of about Rs 400 crore this year, the highest figure of losses as compared to other online retailers in India. However, this has apparently been justified by the Flipkart founders, who do not want to focus on plain ‘profitability’ at the moment. According to a spokesperson for Flipkart, the company wished to continue investing in its operations to become India’s biggest retailer- even at the cost of making profits.  Flipkart is also investing heavily in customer acquisition, by aggressive marketing and improving brand visibility.

The Verdict:

Amazon is focusing more on increasing presence and visibility in India. It is attempting more to gain a strong foothold in the country.

On the other hand, it seems like Flipkart has gone a step beyond, instead trying to enhance the way in which consumers avail its services – by encouraging more new buyers to come onboard and to use mobiles for purchases as well.

2014 was a buzzing year for the online retail industry. We hope the New Year 2015 is equally positive. Fingers crossed!