Who will be the winner in the war of two online retail giants? Amazon vs Flipkart, the stakes are heating up… Amazon and Flipkart have been in a tussle to be the number one online retail marketplace in India. The competition between Amazon and Flipkart has transformed India’s online landscape in many ways. The scrimmage for the number one spot has put a spotlight on India’s growing online and start up market from foreign investors.
This is just the beginning as many companies vie for India billions.
Walmart Enters the Fray
Walmart, the American retail giant, recently bought a 77 per cent stake in Flipkart, and in turn drawn attention to the growing Indian market from foreign investors. Since then Google’s parent company Alphabet has also shown interest in investing with Flipkart.
“The deal indicates the attractiveness of India’s consumption market for global majors,” says Ajay Srinivasan, the director of Crisil Research, a ratings and research company that is part of Standard & Poor’s.
Google Will Always Be Involved
Google has partnered with Raitel to provide Wi-Fi access to service the ever-expanding contingent of online users, a lot of whom will be connected for the first time ever. 500 million Indians are online which makes it one of the world’s largest markets. This being said, the number of online users doesn’t convert to online transactions and – with the ecommerce market currently valued at around 50 billion USD.
The Changing Indian eCommerce Landscape
India’s online landscape is being transformed by changing the way Indian consumers and retailers do business, while highlighting the possibilities of foreign investment in India’s rapidly growing online retail market. The growth in opportunities for foreign investors has been part of the current government’s strategy to create jobs and boost economic growth.
Flipkart founder, and now CEO, Binny Bansal said about the deal with Walmart on Twitter, ” Delighted to welcome @Walmart as our long-term partners in @Flipkart. This is the dawn of a new era for India’s #StartUp ecosystem.”.
India’s growing online consumer market doesn’t come without its challenges, the language barrier being one. India is a country with 22 major languages, plus hundreds of regional dialects, and the fact is that a lot of users are using smartphones for the first time ever and are still yet to trust online transactions.
The Race Is On
The race between Amazon and Flipkart to be the number one online retailer in India has been in the media and under the watchful eye of the public and investors alike. The two retailers have been going toe to toe competing for the title.
The decision to go mobile-only was meant to give Flipkart the competitive edge in a mobile-first market, but only backfired as they lost a sizeable number of users. Meanwhile, Amazon doubled down by instead injecting 200 million into their marketing strategy and offered customers cheaper prices.
India is the fastest growing economy in the world, and, paired with its large talent pool and significantly lower labour costs, the country makes for an attractive opportunity for large tech companies to gain traction and get a piece of the pie. Not only is it a large market, the push for digitization is coming from all directions and that includes from the government, who have relaxed the laws against foreign investment to online marketplaces. The government allows 100 per cent foreign direct investment to ecommerce websites under a set of certain rules which include no B2C based inventory sales.
Legal Considerations in India
This law is said to legitimize existing ecommerce companies who are already operating in India with the aid of foreign investment.
The law also restricts ecommerce marketplaces from suggesting and funding discounts on the seller’s products. Under the old model, Amazon would suggest discounts to its sellers and then cover the difference in an attempt to beat out competition.
This could possibly end the discount war between Amazon and Flipkart, although it is the consumers who will lose out in the end. The government also stated that online marketplaces should set their prices to reflect the prices of bricks and mortar stores throughout the continent to even up the playing field and keep shop owners happy. This law seems almost unenforceable, with marketplaces as big as Amazon and Flipkart who have upwards of one hundred thousand sellers and growing.
The battle between Amazon and Flipkart may have been the catalyst for the government to make legislation regarding online marketplaces and foreign investment. The adoption of 100 per cent FDI or foreign direct investment has opened up India to a global business to business marketplace, in the hopes of a trickle-down effect in the form of jobs for Indian people.
Not all Indian people are happy about the FDI marketplace legislation and when Walmart bought Flipkart, Indian retailers took to the streets in protest, with signs saying “Walmart Go Home”. The retailers were worried that they would not be able to compete with the retail giant’s prices.
Online marketplaces require supply chain, logistics, and warehousing staff, and the number of online retailers will create plenty of jobs for unskilled Indian people, propelling them into the ever-growing lower-middle and middle class in India.
A Bright Future for eCommerce in India
The growing middle class in India, combined with the ever-expanding online user-base, and the 100% FDI law, make it a tasty looking place for foreign investors to stake their share in a huge growing online market.
The population of India stands around 1.3 billion to date, with 500 million online already, and that number keeps growing. The tech industry is booming in India, so much so, that Google and the government are rolling out more infrastructure to get more people online – and the more people online will increase the number of people shopping online.
This, and the fact that global industry giants like Walmart and Amazon are battling to secure their place in the Indian market will see many others follow their lead in staking their claims in the world’s fastest growing economy.
The battle between Amazon and Flipkart has seen the Indian Government and the tech world take notice of the expanding Indian ecommerce marketplace. And its not only traditional commerce that will flourish online. With such a massive population, critical mass is not the issue. Its normally regulations. The potential for bookmakers is enormous if they can convince the Indian government that a regulated online sports betting and casino option can firstly be controlled. But more important, the tax collection is something that cannot be ignored in a country where tax collection is very poor. Sites such as NoDepositRewards have also seen this trend and are making moves towards embedding themselves in the Indian market. The positive trickle-down effect includes the increase in jobs in the logistics sector and India is looking to become the centre of the ecommerce world due to the 100 per cent foreign direct investment policy and the effervescing middle class.
We will continue to watch this space to see what Flipkart and Amazon get up to next. Will Flipkart win out in the end due to their unique insider approach to the Indian market? Or will Amazon steamroller the market with cheap prices, accessible services and advertising across all platforms? It all stands to be seen what the outcome will be.
Those looking to get into the online ecommerce marketplace space from abroad should pay close attention and snap up worthy Indian companies while the laws are so generous. Who knows when the tides may turn and FDI laws are changed? Taking the opportunity to get into such a rapidly growing space is one that will likely pay dividends in the future, should the right moves be made.
And for now, we’ll just have a little browse around on Amazon and Flipkart to find a great deal or two in the sales…