The New Ecommerce Frontier In India
The continuing battle between ecommerce heavyweights Amazon and Walmart has focused primarily on their maneuvering in their home country, the United States. While this campaign continues to rage, this conflict is being played out globally, and the new frontier that pitches these 2 heavyweights against each other is the world’s biggest democracy: India. We’ll look at why India specifically is where this showdown is happening, what the big moves are likely to be, and what this means for the ecommerce landscape generally and individual players specifically.
India: Why It’s A Big Deal
India, the world’s second-most populous country, is home to 1.324 billion people and is fast catching up to China’s 1.379 billion citizens. It dwarfs the United States’ 323.4 million people and is growing quickly.
India’s economy is red-hot. It’s on track to overtake the United Kingdom and become the world’s fifth largest economy in 2018, according to the IMF. This will put it behind only Germany, Japan, China and the US in terms of size. India is expected to become the world’s 3rd-largest economy by 2027, with a GDP of $6 trillion.
India’s ecommerce market is set to grow to $200 billion in the next decade, according to Morgan Stanley, fueled by a number of factors including cheaper mobile data, that makes online shopping increasingly accessible. 2 major national initiatives have had a tremendous effect on moving this economy forward. First, was digitizing India’s predominantly cash-based economy, and second is reforming its complex and outdated tax system.
A joint report from the Boston Consulting Group and Google shows that ecommerce, and in particular the fast-moving consumer goods (FMCG) sector, could grow to $5-6 billion by 2020.
So it’s no wonder that some of the world’s biggest online brands are flocking to the subcontinent, and why Amazon and Walmart – along with a whole bunch of other big players – are vying for a spot in this lucrative market.
The Big Moves
First off, all heads are turned towards Amazon, to see what their big moves will be in India. Amazon expects groceries and household products to account for over half of India business in the next five years. With this in mind, it’s widening its offering in these segments, and items such as fresh produce should not be long in coming, most probably in the form of AmazonFresh. Already cleaning products, creams, and soaps were the largest product categories on Amazon in terms of units sold in India.
Currently in India, Amazon has over 100 million registered users and is the fastest growing marketplace in the country. It offers its Pantry grocery service, as well as Amazon Now (currently only in 4 cities), which has seen successful collaborations with local vendors. Jeff Bezos has noted that the company added more members to its Prime loyalty program in India in its first year than any previous geography in Amazon’s history. Recently, Bezos even highlighted the company’s performance in India when expounding the 16 milestones that the company has achieved.
Walmart meanwhile does not want to be denied a piece of the action. The Bentonville, Arkansas-based company is looking to acquire a controlling stake in home-grown ecommerce company Flipkart, which is already backed by the likes of SoftBank, Tencent and Microsoft.
Flipkart is highly sought-after and is India’s leading online commerce platform. Last year, Japan’s SoftBank purchased a 20% stake in the company for a hefty $2.5 billion – at the time the biggest ever private investment in an Indian tech firm.
The synergies are clear. Flipkart gets a financial injection for further expansion and to keep rivals out, while increasing internal efficiencies. It’s no secret that the company has been mulling a rollout of physical stores, and who better to partner with than arguably the world’s best?
Walmart benefits by getting powerful leverage in the Indian market, which is made even stronger by the fact that it’s through a “local” player. Most importantly, it doesn’t surrender this captivating market to its old rivals at Amazon.
What This Means For Future Of Ecommerce
Like sharks to the smell of blood, it’s not just US companies like Walmart and Amazon that are eyeing India. The stakes are high and the potential payoff is huge. India has also become a key battleground for China’s biggest e-tailer, Alibaba.
And that battle has already begun. Alibaba has acquired a significant stake in Paytm, an Indian “mobile-first” financial services company that offers payments, banking, lending and insurance to merchants and consumers, and is valued at $10 billion; as well as in ecommerce portal Snapdeal. Interestingly, Softbank is also an investor in Paytm and Snapdeal – whose investors include online giants eBay – highlighting the complex set of connections and circles of influence within this world of the mega-players.
It looks like the road ahead is relatively clear for Amazon and Walmart in India – for now. As Morgan Stanley said in their report, “India is a more complicated market than China, and Alibaba has no operational experience in the market. The results of Alibaba’s initiatives will be affected by product localization, strategy execution, and various other factors, some of which may be out of the company’s control.”
As international expansion picks up steam, complexity, as well as competition, is growing. Nowhere is this more apparent than in the new frontier of ecommerce, India; the place that used to be referred to as the “jewel in the crown” of the British Empire.
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