Amazon and Flipkart Control of Ecommerce

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. 

SMEs to E-commerce platforms

Many small and medium enterprises (SMEs) have taken to e-commerce platforms to expand their reach, both in the domestic and global markets. According to a report, 50 Million SMEs in the country, at least three million, especially from smaller cities are already using e-commerce platforms. In coming years, the figure is likely to double and may touch 30 Million in five years.

Zeelplast Machinery was started with Rs. 50,000 in 2008. The company is based out of Ahmedabad. The fully automatic moulding machines manufacturing company was limited to supplying local areas, before it took to e-commerce. Now the company has evolved from strength to strength with its brand identity, marketing support and getting orders from across India.

According to a study conducted by Snapdeal and KPMG, nearly 85 percent of SMEs which adopted E-commerce believe it is a cost-effective medium for sales growth. It also claims SMEs actively adopting the internet for Business activity boast 51 percent higher revenue, resulting in 49 percent more profit and a seven percent broader consumer base than their offline counterparts.

Some E-commerce entities are also helping SMEs to procure raw material at affordable costs. This has emerged as a new line of business. Ahmedabad based tradohub.com is working in a similar way. It supports SMEs for buying raw material from international markets. Buying material from e-commerce platforms reduces the cost by six to eight per cent. This is helping SMEs to adopt e-commerce platforms which are beneficial for IoT and Indian Economy as well.

Book Review – The Google Story

Recently, I had finished reading The Google Story by David A. Wise. This is not a geek manual. There is enough technical information to keep the story moving without losing the reader in code waffle. Google was founded in 1998 and within a span of 17 years; it has become a world leader in internet. Founders Sergey and Larry started Google when they were Ph.D. students at Stanford University in computer science. They both had a crazy idea to download entire information available on the Internet.

There is a lot in the book about the culture of Google, which is compared to a university campus more often than a corporation. Most people works in teams of three to five maximum, and engineers are given 20% time, one day a week in which to work on stuff that’s interesting to them, regardless of its commercial viability. One of the colleagues even writes an equation to explain the whole phenomenon: “youth + freedom + transparency + new model + the general public’s benefit + belief in trust = The Miracle of Google”. The Google story seems to be the mission to prove that equation from first principles.

It is also a business story. For the business reader, it’s fascinating to learn how venture capital firms, still reeling from the post dot com collapse, approached the infant Google with great suspicion, but found the founders and their ideas irresistible. One lesson from the book – no matter how brilliant your science and engineering credentials, you need a business person to talk to the Wall Street and lead your company into the IPO.

It also answers a question that most of our daily users have asked to some point: how does Google makes any money? Vise sees Google as just like any other media corporation in that regard: Advertising. Again the Google Adwords model is described simply. It is a great story. It is a series of chapters that read like articles. There is a whole chapter on Google Chef, Issues in China, and competitive wars with Microsoft. The Google story is the living example of dedication and continued struggle of men who succeeded in achieving their magnificent goals.

It’s Time for “Apponomics”

Having an app is not a need now; e-commerce firms are actively pushing their consumers to their apps and encouraging them to buy through them with attractive discounts and sales. There was a time when sale was put on once or twice a year, but in present era it is every day and several hours sale. For a large percentage of Indians, the mobile phone is either the only or the primary gateway of the Internet.

Internet based companies and social media platforms are in race to acquire Mobile platforms companies. Mobile app also means less data usage and lower load on the server. Marketing cost on mobile app is lower than desktop. This year InMobi, the world’s largest independent mobile advertising company launched its first book, “Apponomics – The Insider Guide to a Billion dollar App Business.” This book is helpful for developers to turn their apps into a successful and sustainable global business.

The great benefit of e-commerce is one can click and buy. But there is a biggest challenge in Mobile app, one has to demonstrate to the people how wonderful the app is so they can download it in the first place and then show them how great the shopping experience could be over and over again. Between a Mobile app and Mobile website, mobile apps are faster and can provide a better customer experience.

There are crucial differences in the way mobile apps and mobile websites allow customers to navigate and experience the shopping journey. Although a mobile app functions a lot like a mobile website but it has certain functional and operational benefits over a mobile website. It gives businesses the advantage of having their own corner on a customer device. Because users have to download and install the app, businesses have more control over their presence on a device. For instance, a mobile app can be closed or inactive, but it still works in the background to send geotargeted push notifications and gather data about the customer preferences and behavior.

There are various considerations before making Mobile apps for a business. Cost of development is high and need to be developed and maintained separately for iOS and Android. It is possible to design Mobile apps for offline usage. Mobile apps provide high speed and rich user experience. In the end, Mobile is the primary source of traffic and conversions and it is becoming one. Products or service is sticky resulting in high percentage of repeat visitors and transactions and a loyal customer base makes the business case for apps very easy.

Mobile Technology will charge Indian Economy

Over the last few decades, the Indian Economy has witnessed a significant transformation. From being primarily an agricultural economy, the services sector has overtaken and has become the leading contributor to growth. E-commerce sector is also emerging as the largest contributor to growth of Indian Economy. Within the services sector, the communication sector has grown at an astonishing 25.7% from 2000-01 to 2008-09. Even during the financial crisis year of 2008-09, while other sectors slowed down, communication sector continued its forward march.

Since then, the importance and role of telecom sub-sector and services is well known. Rising per-capita income and introduction of affordable handsets and lowest call rates have all led to an explosion in the subscriber case. India is the second largest user of mobile in the world with 900 Million users in the world, it accounted for 12% of world’s online population. Findings reveal that every 10% increase in mobile penetration rate leads to a 1.2% increase in GDP.

In last 2-3 years, e-commerce sector emerged as the astonishing business sector. E-commerce companies revealed that maximum number of users explore and order products from mobile. Therefore, companies are shifting their marketing focus towards mobile technology. In the next five years, E-commerce sector will contribute up to 2% to Indian Economy. Mobile apps are becoming the key thing for every company and business today.

For developing markets, basic mobile services still dominate and mobile data is the next wave of development. A doubling of mobile data use leads to a growth in the GDP per capita growth rate of 0.5 percentage points. Telecom companies are coming with 4G penetration in the market, which will be new boost to economy. Research said that, a 10% rise in 3G-penetration increases GDP per capita growth by 0.15 percentage points.

Next thing, which will charge Indian Economy, is the Internet. Every business is dependent on Internet these days. No apps, no site can run without Internet. It has become the necessity of human being today. Mobile phones are more useful when they are connected to Internet. India lacks behind in providing good internet connectivity to its citizens. However, government and big firms like Google, Facebook are working on drones project to provide Internet connection to all citizens across the world.

There are several other benefits of mobile phones. They significantly help to maintain physical and psychological health when family members move away from home. In addition, they enable women to maintain three roles within the household, simultaneously being wives, mothers, and wage earners. More mobile phones subscriptions are correlated with more democratic participation, less gender inequality and longer time spent in education. In all three areas, the impact of mobiles on social development indicators is stronger in developing countries. All these benefits of Mobile technology will charge Indian Economy.