• Home
  • News
  • Retail
  • Flipkart, Amazon relook their growth strategy

Flipkart, Amazon relook their growth strategy

By Meenakshi Kumar

loading...

Scroll down to read more

Retail

In order to boost sales, Flipkart and Amazon India, are in the divergent strategizing mode. Flipkart for instance is taking on untapped categories for its existing user base. While Amazon will lead expansion of its e-commerce market as it adds newer products and maintains high levels of advertising spending, aimed partly at attracting new users. Currently, online penetration—the percentage of shoppers who have bought a product online at least once—is highest in books, smartphones and electronics. The online reach of most other categories such as fashion and furniture is still abysmally low.

As to Nitin Seth, COO, Flipkart, was quoted saying recently, the biggest lever of growth over the next couple of years will be increasing the online penetration in the other categories (fashion, furniture, large appliances and groceries). And online penetration increases when you reach a certain tipping point where like in mobiles, you are able to deliver quality products at a very different price point—some 20 per cent to 40 per cent lower than what you get offline.

Meanwhile, spending by new users helped increase Amazon India’s unit sales by 124 per cent in calendar year 2016, compared with the previous year. According to a spokesperson, the growth came from a mix of increased share of wallet for existing customers as well as continually bringing in new customers. New customer acquisition grew by 60 per cent in 2016 and over 65 per cent of their active customer base in 2016 was new users acquired, driven by growth from tier II and III cities.

Relook at their strategy

Until 2016, Flipkart had led the expansion of the e-commerce market in India, spending hundreds of crores of rupees on discounts, advertising and logistics. Amazon entered India in June 2013 and applied its renowned technology and retail expertise to capitalise on the market that Flipkart had built by offering even higher discounts, a wider product assortment and faster deliveries. The role reversal is driven partly by investor pressure on Flipkart.

Since the beginning of 2016, Flipkart has reduced spending on advertising, among other things. The online retailer has identified high-value items such as mobile phones, large appliances and furniture as its most important products, while it is aiming to curtail the cost of delivering low-value products such as fashion and groceries. At this juncture, the stakes are too high for Flipkart to increase its losses by spending on bringing new shoppers online when existing users can be tapped in a far less cash-intensive manner. Another factor driving the shift in Flipkart’s strategy is the slowdown in the growth of the e-commerce market last year.

Amazon, on the other hand, is eager to sell all kinds of products to customers, including books and groceries. The company aims to be the ‘everything’ store—where customers can find any and all products that they are looking for. Whether they are watching a movie, buying a mobile phone, their groceries, sports equipment or even something for their pets—they come and shop on Amazon marketplace.

Growth expectations

In the next fiscal year, Flipkart expects the e-commerce market to increase by 40-50 per cent and the company has said its sales may jump by 50-60 per cent, with an indication that it will regain market share from Amazon. Like Amazon, Flipkart too is targeting the so-called Middle India, but most of its efforts will be aimed at existing users over the next two years.

Amazon
Flipkart