In ecom-land, it’s Bezos v/s Bansals

04 Aug,2014


By Radhika P Nair


Deep discounts for customers and big incentives for merchants who sell on their marketplace are what Flipkart, India’s largest online retailer, is planning as it aims for fourfold growth in sales over the next 12 months.


In the aftermath of the biggest round of fund-raising in India’s Internet industry, Flipkart and challenger Amazon plan to open more warehouses, hire in larger numbers and acquire companies with newer products or technology as they battle for supremacy in one of the fastest growing markets for online commerce globally


“It is still day-one of Indian e-commerce,” said Amit Aggarwal, vice-president and India country head at Amazon. Last Wednesday, Amazon founder Jeff Bezos said he will spend $2 billion (.`12,000 crore) to build operations in India without offering a timeframe. The announcement came a day after Flipkart declared funding of $1 billion from a host of global investors.


Amazon’s announcement is being viewed as the strongest call for battle between the two protagonists.


This month, Amazon will add a new category and also increase the range of books and electronics – its two main product lines in India — as it powers ahead to reach sales of Rs 6,000 crore this fiscal. In the past year, 8,500 sellers have hawked their wares on Amazon’s marketplace.


Flipkart, which adopted a marketplace model last year, aims to increase the number of sellers to 50,000 in the next year from the current level of over 4,000.


“China’s ecommerce industry reached its inflection point in 2005 when Alibaba raised $1 billion. We believe Indian ecommerce is at that inflection point right now,” said Sachin Bansal, Flipkart’s cofounder who expects a significant chunk of the latest funding to be used to enhance services for sellers. The Bangalore company runs six warehouses and intends to open 50 more in the next three years.


Amazon is also increasing its warehouse count to ten with three new ones coming up in Maharashtra’s Bhadarpur, Haryana’s Manesar and Ghaziabad in the next few months.


Experts said the focus of all this splurging will be dominated by one ultimate goal, attracting more customers. “Consumers will be wooed like never before. And it will not just be in the form of discounts; the two companies will unleash assortment and services that are specifically meant to retain them,” said Arvind Singhal, chairman of retail advisory, Technopak.


Merchants who do business with both companies said Amazon for now, is more focused on electronics and books. “This brings scale and helps them show customers that they can provide products at lower costs quickly,” said one person.


This is exactly how Flipkart scaled up, by focusing on books initially and then on electronics. Now, fashion has become its most important category, especially after it acquired fashion portal Myntra in May, contributing to one-third of the company’s sales, said Mr Bansal.


The Flipkart site will focus on fastselling fashion products that will bring in volumes, while Myntra will focus on the higher-value products and inhouse brands that deliver profits, said a senior official at Flipkart. Branded apparel can bring in margins of up to 35% while in-house apparel brands command profit margins of up to 60%.


“We are here for the long term. Our aspiration is to make Flipkart a $100-billion company,” said Mr Bansal, 32, whose company clocked $1 billion in sales in March 2014.


Amazon also aims to reach the milestone this fiscal. “The aim is to have a 30% market share soon,” said a senior executive at Amazon, who did not want to be identified.


Flipkart also plans to get a bigger share of exclusive sales on its portal, as it did recently with Motorola phones. Last month, it started selling China’s Xiaomi phones while Amazon launched sales of a Samsung phone and Swipe’s Slice tablets exclusively.


Flipkart is also actively scouting for companies to purchase. “We are looking across the board. We will acquire if we find interesting companies in wearable devices, fashion technology, mobile internet, and robotics and in other areas,” said Flipkart’s Mr Bansal.


The companies are also setting aside money for hiring and for increments. “War on talent is yet to begin as both are targeting the FMCG and telecom industries,” said a consultant. Flipkart will double headcount to 26,000 this fiscal. Amazon too is expanding and pays two-year joining bonuses of over Rs 40 lakh at the top levels.


“Many companies who scaled up much slower than these two have faltered before,” said Technopak’s Mr Singhal. “It is like making an entire army move in tandem. Who will get that right is what we need to see.”


Source:The Economic Times

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