Amazon India and its largest local
rival, Flipkart, which was modeled on the American Online retailer, are
changing their strategies in diverging ways to dominate fast growing e-commerce
market. Amazon India and Flipkart are the country biggest e-commerce firms. Both
are supposed to operate as marketplace platforms that connect small merchants
with buyers. They are not allowed to sell directly to shoppers.
But both the companies have adopted
complex corporate strategies and used a mix of the marketplace and the direct
selling business model. Amazon is using a joint venture to increase the direct
selling component in its model, even as Flipkart is fast moving towards a
marketplace. Amazon is willing to do whatever it takes to succeed in India, the
last big unconquered e-commerce market in the world.
Amazon has already lost out to
Alibaba Group Holding Ltd in China. Amazon success has been built on its avowed
principles of offering the widest product coupled with low prices. To stay true
in a nascent market such as India, the company has decided that it needs to
have more control over its supply than what a pure marketplace allows. This requires
more cash, but the online retailer has already pumped $2 Billion into its India
Business over time.
Flipkart has changed its role model
to China’s Alibaba. Flipkart was started in 2007 by two Amazon.com Inc.
employees. The firm began as book retailer, just like Amazon in 1995 but
gradually added all kinds of other products, including mobile phones, laptops
and clothes. Until 2013, it sold all these directly to shoppers not through
third party merchants. However, this model is simply not conducive to making
profits.
Flipkart, which has raised $2.6
Billion over the past 18 months, is expected to report huge loss this year
because of its aggressive expansion and deep discounting. At some point it
needs to go public and the pressure to do that increases every year. Indian
Ecommerce market resembles that of China more than the US. The success of
Alibaba IPO strengthened Flipkart resolve to try and adopt Alibaba advertising
driven revenue model.
Under this model, Flipkart plans to
operate as a marketplace and earn the bulk of its revenue from ads and other
services, such as logistics and warehousing charged to sellers. Flipkart is
still trying to find the success formula that will work in India. Currently
both companies along with Snapdeal have the same goal to dominate the
e-commerce sales.
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