Introduction

India’s marketplace-led e-commerce landscape is relatively undeveloped compared to China and its Western counterparts, but has recently emerged as a hotbed of opportunity. Homegrown marketplace platform Flipkart enjoyed nearly unrivalled dominion over the India online market from the time it launched in 2007 until Amazon entered in 2013. Amazon’s worldwide operations, deep pockets, expertise and quick understanding of the local market helped it quickly overtake domestic rivals to become a leading player. But just as it seemed Flipkart could be overtaken by the US online juggernaut, Walmart acquired the company in 2018, bolstering its resources to be better positioned to take on Amazon head-to-head. In this report, we examine how Flipkart and Amazon India compare, which is leading and the niche marketplaces that could challenge their ambitions of becoming India’s “everything stores.”

Amazon India and Flipkart: Key Figures and Offerings

As soon as it set foot in India, Amazon began pulling out all the stops to beat local rival Flipkart. Despite Flipkart’s six-year lead, it was no match for the Amazon Goliath and quickly lost ground on several fronts. Figure 1. Summary Comparison of Flipkart and Amazon India [wpdatatable id=110 table_view=regular] Source: Company reports/YourStory/Crunchbase/Financial Express/Reuters/The New York Times/Livemint/BusinessWorld/Coresight Research   Who’s Winning by the Numbers Revenues and losses: In the fiscal year ended March 2019, Flipkart posted revenues of $602 million for its marketplace business while Amazon’s revenues were $1.1 billion, according to news site YourStory.com. Flipkart’s losses narrowed until 2018 but widened again from $165 million in 2018 to $231 million in 2019, while Amazon’s losses were $893 million in 2018, narrowing to $808 million in 2019, according to YourStory.com. By gross merchandise volume (GMV), however, Flipkart appears to be marginally ahead of Amazon, according to data from Forrester Analytics. In 2018, Amazon held a 31.2% share of India’s e-commerce market by GMV while Flipkart held a 31.9% share. If we include Flipkart group platforms Myntra and Jabong (which merged in 2018), the share increases to 38.3%. Three other companies, Paytm Mall, Snapdeal and Big Basket, account for a further 7.0% of GMV, with the remaining 23.5% shared by a number of even smaller companies. Myntra is Flipkart’s fashion-only platform, featuring a mix of Indian and international brands, along with private labels. Jabong was a fashion-only platform when Myntra acquired it in 2016. Flipkart later eliminated the banner and merged the business into Myntra in February 2020. Now, Myntra targets premium consumers while the Flipkart platform offers a limited, lower-priced mix of fashion along with deeper discounts, targeting mass consumers. Figure 2. Summary Comparison of Flipkart’s and Amazon India’s Share of Indian E-Commerce, 2018 [wpdatachart id=35] Source: Forrester Analytics   Investments: Flipkart has seen ups and downs in its valuation after bleeding heavy losses over consecutive years. Flipkart’s peak valuation was $15.2 billion in 2015, but hit a low of $5.6 billion in 2016 when Morgan Stanley Institutional Fund Trust and other investors lowered the valuations of their Flipkart stakes. Flipkart later raised $4.1 billion from Softbank and Naspers in 2017, taking its valuation to $11.6 billion, further bolstered when Walmart paid $16 billion for a 77% stake in May 2018. The deal included a $2 billion infusion. Flipkart was valued at $21 billion shortly thereafter. Meanwhile, Amazon CEO Jeff Bezos said he is committed to growing the company’s business in India. Amazon has invested nearly $6 billion to build its marketplace business and payments arm in India. During his latest visit to India in January 2020, Bezos announced a $1 billion investment to support small and medium businesses, this came on top of nearly $244 million in fresh funding announced just before his visit to bolster its wholesale and payments businesses, according to regulatory documents. Users: We think Amazon has more active customers than Flipkart, based on Amazon’s more than 150 million users as of September 2018 (latest available information) and the fact that Flipkart only recently hit the same number (some year and several months later), according to its website. Staff: Flipkart employs 14,000, while Amazon employs 62,000 fulltime staff in India. The discrepancy may be because Flipkart staff primarily support the company’s India business, while Amazon staff work on global offerings such as Kindle, Audible and Amazon Web Services (AWS) in addition to supporting domestic online retail and payment operations. In August 2019, Amazon opened a new 9.5-acre campus in Hyderabad which will house over 15,000 employees, the largest Amazon facility outside its headquarters in the US. Sellers: Amazon’s marketplace hosts more sellers than Flipkart: Some 550,000 on Amazon India but just 120,000 on Flipkart. Listed products: Flipkart has over 100 million products on its marketplace, according to current data in its “About Us” section. Amazon had twice that many as of August 2019, according to India SVP and country manager Amit Agarwal speaking to media at Amazon’s Hyderabad campus launch. Who’s Winning by Offerings to Customers and Sellers? Flipkart and Amazon have similar features and offerings, with the exception of a few features Flipkart offers that Amazon does not. For many of Amazon’s popular offerings in India, such as Amazon Prime (launched in July 2016) or AmazonFresh (launched in August 2019), Flipkart has equivalent offerings. Premium Membership: Flipkart Plus offers fast, free delivery and early access to sales events and rewards. But, unlike Amazon Prime, it is not subscription based: Flipkart users just have to earn 300 points or “supercoins” within 12 months to be eligible. Users earn two “supercoins” for every 100 rupees ($1.4) spent, but once they reach Flipkart Plus status they earn four for the same amount. “Supercoins” can be redeemed for products or other rewards. Online grocery: To compete with AmazonFresh, Flipkart launched its own online grocery delivery service, Supermart, in 2017. The service is currently available in five cities with plans to expand. Shoppers can buy grocery staples, branded snacks, beverages and other packaged food along with personal care and household products for next day “open box delivery,” which lets shoppers check and return items they don’t want. While AmazonFresh offers fresh fruit and vegetables, Flipkart does not offer fresh food—but in December 2019 Flipkart invested in fresh food supply chain tech startup Ninjacart, suggesting Supermart could add fresh food soon. Payment: PhonePe, Flipkart’s digital payment subsidiary, received $60 million in funding from its Singapore-based holding firm, according to regulatory filings. This is PhonePe’s fourth fund infusion from its parent, with previous injections totaling nearly $240 million. In October 2019, PhonePe was rumored to be spinning off from Flipkart group to be directly owned by Walmart, according to Economictimes.com which cited “people familiar with the transaction.” PhonePe has some 20 million average daily users making more than 500 million transactions per month worth some $180 billion per year. Amazon Pay has been making strides of its own since it began operations in India. Out of the $244 million invested in the group in late 2019, $51 million is earmarked for Amazon’s payment arm, in addition to the nearly $394 million in funding already invested, according to Economictimes.com. In addition to the standard digital payment fare, Amazon Pay users can pay using voice commands—making India the first market in which Amazon Pay offers this. Delivery: Flipkart and Amazon are roughly equally positioned when it comes to delivery services to remote locations, when it comes to working with local convenience stores (or kiranas) for last mile delivery, in initiatives to support small and medium businesses, to support women entrepreneurs and to use its platform to boost exports—in particular giving small businesses access to international markets. Amazon’s January announcement to work with small- and medium-sized businesses follows a move by Flipkart ahead of its September 2019 Big Billion Days campaign to extend its reach into smaller cities and towns. To strengthen last-mile delivery capabilities, the company signed on 27,000 kiranas, of which 17,000 are designated for last-mile delivery while 10,000 serve as authorized buy zones for mobile devices and large appliances. The company doubled the number of pin codes (postal codes) to which it offers pick up capabilities to sellers. But in two areas Flipkart seems to have an advantage over Amazon: its fashion website Myntra and physical presence via Walmart’s Best Price Wholesale stores. Fashion Platform: Both Flipkart and Amazon sell fashion merchandise, with similar ranges of domestic and international brands, but the user experience is another story. Flipkart’s Myntra is a dedicated fashion platform with a richer user experience, broader assortment of brands and ranges, and a “try and buy” option which allows customers (for a fee) to order and try on selected merchandise at their homes before purchasing, and return what they don’t want. Myntra has been disrupting the way people buy clothing in India: It is one of the few fashion sites that uses artificial intelligence and augmented reality to generate designs for its private label brands. Myntra has also opened physical stores for its marquee private label brand Roadster—cashierless stores similar to Amazon Go stores. Myntra also leverages its Myntra Extended Network for Service Augmentation (MENSA) of over 15,000 kiranas (small, local stores) for last-mile delivery, especially outside the larger cities. And, Myntra does indeed seem to be delivering the goods for Flipkart, even if it’s not yet profitable: The retailer is the leading fashion e-commerce site in India, according to digital commerce consultancy eComKeeda, but has yet to turn a profit. In the fiscal year ended March 2019, Myntra reported revenues of $148 million, more than double its 2018 revenues of $57 million—but losses grew more quickly, more than tripling from $22 million in 2018 to $77 million in 2019. Amazon will have trouble matching this fashion offering unless it collaborates with or acquires an existing player. For now, it is leveraging partnerships with various fashion brands, even creating brand microsites on its marketplace. Physical presence: Walmart entered India in 2009 when it opened its first wholesale cash-and-carry store under the banner Best Price Modern Wholesale. Now, there are 28 Best Price Modern Wholesale stores in nine states, plus three fulfillment centers. In January, Indian newspaper Business Standard quoted unnamed company sources as saying Flipkart may acquire Best Price Modern Wholesale so the companies can benefit from sourcing and selling synergies. Even if Flipkart does not absorb the wholesale business, it can still reach customers through its parent company’s stores. Amazon, on the other hand, relies on partnerships with local retailers to reach customers in the physical realm. In January 2020, Amazon announced a joint venture with Indian multi-format retail group Future Retail under which Future Retail will list its products on Amazon Prime Now and offer two-hour delivery or pickup in four cities. The service is currently available in 22 Future Retail stores and will eventually be rolled out to all 1,500 stores in 25 cities. Note: The service applies only to Future Retail products, Future Retail will not fulfil orders for other products on Amazon. Amazon also took a 5% stake in Indian department store group Shoppers Stop, which now hosts Amazon Experience Centres in several stores in which shoppers can test, touch and feel products from brands exclusive to Amazon. While these partnerships give consumers greater access to Amazon products, and Amazon greater access to physical retail with flexibility in formats, it does not give as much direct control as wholly owned stores. Shopping Festivals: Similar to Amazon’s flagship Prime Day shopping festival in the US, Flipkart runs a version targeting the India market called Big Billion Days. Read Coresight Research’s coverage of the 2019 Big Billion Dayssales event and Amazon Prime Day in India. Figure 3. Flipkart and Amazon: Features and Offerings [wpdatatable id=111 table_view=regular] Source: Company reports/Coresight Research Despite going to head-to-head in some areas, Flipkart and Amazon are not the only threats each faces in India.

New Competitor to Amazon and Flipkart: JioMart

One of the latest entrants into India’s e-commerce market is JioMart, owned by the country’s largest conglomerate and also its largest retailer, Reliance Industries. The JioMart app connects customers with local stores that accept and fill online orders for delivery. JioMart piloted in early January in some Mumbai suburbs but already offers over 50,000 grocery products and free home delivery with no minimum order. According to Reliance Chairman and MD Mukesh Ambani, JioMart will tap into the country’s extensive network of kirana stores which “form the backbone of India’s commerce ecosystem.” Ambani added that “these…entrepreneurs have suffered in recent years because of their inability to invest in technology and infrastructure,” and that connecting them via the app will “empower them with (an) end-to-end digital and physical distribution stack.” Setting up a network of local stores for order and delivery will also facilitate a simpler structure for JioMart as Reliance does not have to invest in creating a delivery network. JioMart will offer products the kirana sells, Reliance will provide the technology support, including POS machines, and leverage its Jio network to connect shoppers to the kirana. Reliance Group is also India largest retailer, operating multiformat retail stores, including grocery, and also operates mobile phone network Jio with over 350 million subscribers. Reliance could leverage its 350 million Jio mobile phone subscribers to grow JioMart’s shopper base through loyalty programs, according to an unnamed source that spoke to The Financial Times. Reliance also faces fewer operating restrictions: Foreign-owned firms can offer only up to 25% of their merchandise from subsidiaries, the remainder has to be sourced from local suppliers. As a 100% Indian-owned company, JioMart does not face these restrictions.

Other Competitors: Niche E-Commerce Platforms

Coresight Research profiled major domestic e-commerce platforms in Indian E-Commerce Platforms Update, including general and lifestyle merchandise marketplace platforms such as Snapdeal, Paytm Mall and Shopclues as well as specialists such as Bigbasket. These smaller players remain competitors to both Amazon and Flipkart despite their dramatically smaller scale, and of course Reliance could emerge as a major competitor being one of the country’s largest conglomerates—but competitive threats could also come from far less widely known niche players. Online Pharmacies: PharmEasy, Practo and 1mg India’s online pharmacy market operates in a regulatory grey area as the rules that govern online retailers in general and those that govern pharmacies are different. The All India Organisation of Chemists and Druggists, representing some 900,000 brick-and-mortar pharmacy retailers, has been lobbying the government against online pharmacy sales until the rules are clarified, but they continue to operate. Based on funding, the largest in the country include PharmEasy, Practo and 1mg, but there are some 50 startups in this segment. As of March 2020, PharmEasy had raised $329 million, Practo had raised $251 million and 1mg $174 million, according to data from Crunchbase. In the US, Amazon entered the online pharmacy segment with its acquisition of PillPack for $1 billion. In India, Amazon and Flipkart offer health supplements and over-the-counter medicines on their platforms, but neither offers prescription medications. While neither Amazon nor Flipkart have made any public moves into the online pharmacy business in India, given Amazon’s goal of becoming the everything retailer and its investment in PillPack, it seems likely one or both online platforms will look at this emerging opportunity eventually. In the meantime, the government has created a draft document of rules governing the running of e-pharmacies but it has not yet finalized it. Online Beauty and Personal Care Retailer: Nykaa Nykaa is India’s largest online beauty and personal care retailer, selling over 300,000 products from more than 1,500 brands, according to business news site The Ken. Nykaa also offers its own brand of cosmetics and recently opened stores in several cities in India. Nykaa offers a richer buying experience, with products exclusive to Nykaa and curated product lists for a more personalized experience. Nykaa has so far raised $93.3 million, according Crunchbase.com data, and has plans to raise further funds this year, targeting a valuation of $1 billion, and media has reported plans for an IPO. Organic Products Stores: Nature’s Basket and Qtrove Nature’s Basket is an organic food retailer selling online and through 36 physical stores in India. Spencer’s Retail group, which operates convenience stores and hypermarkets and has several own brand consumer products including food, personal care, household and clothing, acquired it from Godrej Group in 2019 for some $43 million. Qtrove is an online-only retailer of over 10,000 curated organic food, beauty, personal care and household products from 800 local entrepreneurs. It was launched in 2015 and has raised $50 million in funds so far. Qtrove has stringent rules surrounding uniqueness and exclusivity for sellers on its site. It hopes to grow from serving 100,000 customers in India currently to 10 million customers and curating 100,000 sellers globally over the next five years. Apart from Nature’s Basket and Qtrove, there are several other smaller online platforms selling organic products.

India’s Online Retail Market Expected To Hit $200 Billion

The retail sector in India, despite growing in leaps and bounds over the recent few years, is still much less mature than its Western counterparts or even China. India’s e-commerce market was worth $39 billion in 2017, and is expected to grow at a CAGR of 17.7% to $64 billion in 2020, but growing more quickly thereafter to hit $200 billion by 2027, according to the India Brand Equity Foundation (IBEF). Figure 4. India E-Commerce Market Size (USD Bil.) [wpdatachart id=36] Source: IBEF Rising incomes, increasing Internet access and greater smartphone penetration are expected to fuel this growth.

Key Insights

Amazon and Flipkart both present similar offerings and features in the India market. Flipkart dominated the market before Amazon arrived, but now seems better positioned to take on the new competitor thanks to its acquisition by Walmart, giving it greater access to finance, Walmart’s global network and its fleet of domestic stores in India. Regulations for foreign companies in India’s e-commerce sector are constantly under scrutiny and market conditions can therefore be somewhat unpredictable: How regulations may evolve in the future and how those changes may affect Flipkart and Amazon remains to be seen, and rules that favor local companies would benefit Reliance at the expense of Flipkart and Amazon. That said, currently it appears Flipkart has a greater opportunity to capture and hold a leading share of India’s growing e-commerce sector.