5/10/2015

FlipkartvsSnapdealvsAmazon:BattleofthebigboysBusinessToday

Thebattleofthebigboys
FlipkartvsSnapdealvsAmazon
GoutamDas

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Wewillget100,000

Edition:May24,2015

TheconversationwithAmazonIndia'scountrymanagerAmit
Agarwalbeginswithhimdismissinghisrivals.
Flipkart,India'slargestecommercecompany,does
everythingAmazondoes,andviceversa,Ipointout.Thereis
littleproductdifferentiation.
Agarwalsnapsback."Theyareaverylowbenchmark."
ColleaguescallAgarwala"TypeA"apersonalitytypethat
psychologistssayareexcessivelycompetitive,aggressive,work
obsessed,successoriented,proactive,andmostlyworkaholic.
NotjustAgarwal.AlmostallleaderswecomeacrossinIndia's
nascentbutfastgrowingecommerceindustryfitthat
description.Itisbecomingaslugfest.
Accordingtoa2014reportbyMorganStanley,threeplayers
havepulledaheadinthehorizontalmarketplacerace.Flipkart
leadswitha44percentshareofthe$6.3billionIndiane
commercemarket,byGrossMerchandiseValue

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sellersbyDec2015:
Flipkart'sAnkitNagori

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restaurants:
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Chaddha

FlipkartvsSnapdealvsAmazon:BattleofthebigboysBusinessToday

(GMV).SnapdealisNo.2with32percentshare,while
Amazon,alatestarterinIndiaitlaunchedinJune2013has
15percent.Amazontouched$1billioninsalesin2014.Forthe
company,Indiaisthefastestgrowinginternationalmarketto
reachthatmark,injustoneandahalfyears.Amazondoesnot
agreewiththeMorganStanleyreportonthedifferenceinGMV
share.
AndSnapdealCEOKunalBahlinsiststherace
betweenFlipkartandhiscompanyismuchcloser.The
MorganStanleyreportwaspublishedinFebruary,before
SnapdealboughtFreeCharge,amobiletransactionscompany.
"Today,ifyouaddFreeCharge,whichisafewhundredmillion
dollarsannually,itisreallyneckandneck,"Bahlsays."Flipkart
andMyntrahadafiveyear,$500million,and10,000person
headstartonus.Today,itdoesnotseemsomeonehadahead
startonus,"headds.Snapdealstartedin2010.Bythetime
Amazonlaunchedinmid2013,Flipkartwasalreadynearingan
annualGMVofabilliondollars.Flipkart,meanwhile,thinksits
firstmoveradvantagewillholdgood."Flipkartasabrandhas
veryhighconsumerinterest.Itisthemosttrustedonlineretail
brandinthecountry,"saysMukeshBansal,thecompany's
headofecommerce."Wehavedeeperunderstandingof
consumers.BetweenFlipkartandMyntra,itwouldbemore
than50percentmarketshareofallconsumertransactionsin
India,"headds.FoundersSachinandBinnyBansaldidnot
speaktoBTforthisarticle,butfourcompanyexecutivesspoke
onFlipkart'sbehalf.
Meanwhile,revenuefigures
fromRegistrarofCompanies
(RoC)doshowFlipkart
remainsinlead.Flipkart
didn'thavemuch
competitionin2007whenit
started.Itsfoundersinitially
thoughtofaprice

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comparisonwebsitean
aggregatorofecommerce
sites.Buttheysoonrealised
therewerehardlyanye
commercesitesinIndia.So
theyfoundedFlipkartandit
quicklypulledawayfrom
olderetailerssuchas
Indiaplazabyinnovatingand
offeringmanyfirsts24/7
customersupport,cashon
delivery,aswellasareturn
policy.
Butthoseinnovationsare
nowcommoditised.Every
bigplayeroffersthesame.
Allthreealsoadvertise
aggressivelyontelevision
andprinttobuildtheir
brandrecalltheyare
battlingtobethefirstto
announcecategorylaunches,
newservices,andfunding
competingforglobaltalent
whiletakingpotshotsateach
otheronsocialmedia.
OnFebruary20,apictureofaFlipkartofficewithtwo
receptionistsandanAmazonbrandedpackagelyinginone
cornerwentviralonTwitter."Even@FlipkartOrdersfrom
@Amazon!"thetweetread.Flipkartresponded:"Werecycled
saidpackagingasourreception'sdustbin."Twitteratis
screamedformoreblood."FlipkartandAmazon,gogetaknife
youboth,let'sseewhowins,"apostsaid.AmazonIndia
tweeted:"ThereisabitofAmazonineveryecommerce
company."

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FlipkartvsSnapdealvsAmazon:BattleofthebigboysBusinessToday

Therealknivesinthisbattlearemoredangerousthantweets.
Accordingtoindustrysources,AmazonIndiahasdata
scientistswhosejobistoonlyexecutestrategicpricingthat
makesFlipkartbleed.SellersonAmazonmayhave2,000
refrigerators,forinstance.Itmayofferdeepdiscounton300of
them.ThatwillprovokeFlipkarttodiscountfurtherand
henceadduptoitslosses."Amazonisusingitoutofdesignto
maximisethebleedingatFlipkart.Todaythegameisabout
whohasthestaminatolastlonger,"saysanindustryveteran
whodoesnotwanttobeidentified.
Allthreearemarketplacesandsellersontheirplatformsdon't
necessarilyagreetopricecutsthecompanieswantthetrio
indulgein'gapfunding'.Theymakeupthedifferencebypaying
sellersandchargingthecosttopromotionalexpenses.While
companiesremaintightlipped,itiswidelybelievedthat
Flipkart,SnapdealandAmazonburnmorethan$100million
ofcasheverymonth.Flipkarthasthehighestcashburnrate
butthenitalsoraisedthelargestamountsome$2.3billionso
far.Snapdealhasraisedcloseto$1billionin2014,while
AmazonIndiaisbackedbyaparentwhichhaspledged$2
billioninvestmentintheIndianmarketplace.Allwillprobably
needevenmoremoney.Towinmarketshare,allthreediscount
constantlyandaddtotheiralreadyhumungouslosses.Flipkart,
in2013/14,ranlossesofRs400crorewhereasSnapdeallost
Rs265crore,andAmazonRs321crore.Someestimatessay
FlipkartandSnapdealhaveroughlyenoughcashtolastouta
yearandahalfatcurrentburnrates.Andthiswarisunlikelyto
besettledwithinthattimeperiod.
Whileallthreeappearlargelysimilartotheaveragecustomers,
therearesubtledifferencesinofferingsandbusiness
philosophies."Peopledon'tgotoAmazonforacrazysale.But
theydotoFlipkartandSnapdeal.Amazon'sphilosophyisto
offerabetterproductateverydaylowprice.ButFlipkartand
Snapdealareseenasdeepdiscountingsites,"saysMahesh
Murthy,ManagingPartneratSeedfund,anearlystageventure
capitalcompany.
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Q&A:We'llget100,000sellersbyDecember2015:
Flipkart'sAnkitNagori
Snapdealinsistsitiswrongtoseeitasavanillaetailer.Itsays
ittargetstheentireconsumptionecosystem."RetailinIndiais
a$500billionmarket,consumptionis$1.4trillion,andretailis
asubsetofconsumption,"saysBahl."Whatcomesbetween
retailandconsumptionaretravel,utilitypayments,education,
financialservices,etc.Thereisnoreasonadigitalecosystem
shouldnotmakethosemoreefficient,"headds.Snapdeal's
acquisitionofmobiletransactioncompanyFreeChargeand
RupeePower,amarketplaceforloans,creditcards,and
financialservices,ispartofthatoverallstrategytobethebig
playerintheconsumptionspace,hesays.
Thebattleoftomorrow,itemerges,willbefoughtontwoother
parameters.Therivalrywillbeaboutofferingnewandmore
selectionofproductandservices,andfasterdelivery.Low
prices,ofcourse,willcontinuetobeaprimarydriverbutallthe
threeetailersareinnovatingtoreducetheseller'sexpenses.
Thebighope:itwouldinducehimtosellcheaperallby
himselfgapfundingand,thereby,cashburn,wouldslow.
Amazonhasplayedtheecommercegameformanymoreyears
thanbothFlipkartandSnapdealcombinedthecompanywas
foundedin1994inSeattle.ItsIndiateamsaysithasinplace
themostcomprehensiveplantoreducecashburn.Amazonhas
broughtinarangeofsellerservicesthathavebeentestedin
marketsglobally.Servicessuchas'PaywithAmazon'addresses
paymentcosts.ItallowssellerstouseAmazon'spayment
infrastructure,itscustomerbase,andthedeliveryaddresseson
theirwebsite.Trafficcosts,similarly,areaddressedthrough
someadproductswhile'FulfilledbyAmazon'givessellers
accesstowarehousespace,picking,packing,delivery,and
returnservices."Thereisaperunitrate.Allcapitalcoststhat
lockupworkingcapitalhavebecomevariablecosts,"Agarwal
says.Iftheselleralreadyhasawarehouse,hecanjustusethe
company'sdeliverylogisticsthroughaproductcalled'Easy
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FlipkartvsSnapdealvsAmazon:BattleofthebigboysBusinessToday

Ship'.ThecompanyrecentlylaunchedAmazonbusiness.in,a
separatewebsiteforsmallandmediumbusinessestobuybulk
quantitiesatwholesaleprices.Thisisabusinesstobusiness
(B2B)marketplace,similartoAmazonsupply,theretailer's
industrialbuyingventureintheUnitedStates.
"Wearetakingeverysinglecostelementoutoftheequation.
Thatisabigdriveroflowpricestheonlysustainablewayto
drivelowprices,"saysAgarwal."Youcanlowertheprice
yourselfthroughdiscounting.Butyoucannotaffordtodoitfor
averylongtime."
Q&A:We'llnevercompetewithoursellers:Snapdeal's
KunalBahl
WhileFlipkartandSnapdealofferfulfilmentservicesandother
productstoeasesellercosts,neitherofthemhasquitethe
bouquetAmazondoes.However,bothareworkingtooffer
theirsellerscheapercapital.
"Wearepartneringnonbankingfinancecompanies(NBFCs)
wheresellerscansourcecapital.Wehavealreadyprovided
capitaltomorethan50sellersaspartofthelendingpilot.We
providedataandriskprofilingtoNBFCs,"saysAnkitNagori,
SeniorVicePresidentatFlipkart.Snapdealhasa'Capital
Assist'Programmeforsellerfinancing.Sellersgetfunded
throughamarketplacecreatedforthemwherelenderspartner.
CEOKunalBahlsaysthecompanywouldhaveassistedloans
worthRs100croretosmallbusinessesonitsplatform,and
thusfar,thereisnononperformingasset."Thebusinesses
borrowingarepaying100to150basispointslessthanwhat
theywouldhaveotherwiseintheofflinemarket.Thattheypass
ontoconsumersaspricebenefit,"heexplains.
Alletailersareaggressivelystockinguponsellersand
products.Snapdealisaddingoneproducttoitsselectionevery
10seconds.Amazonhasabout700,000itemsinstocktoday
thatcanbedeliveredthenextdayabout22millionproductsin
itscatalogueoverall.Boththesecompanieshave100,000
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FlipkartvsSnapdealvsAmazon:BattleofthebigboysBusinessToday

sellers(AmazonnumberincludessellersonJunglee,a
comparisonsiteownedbythecompany'sUSparent).Flipkart
has30,000sellersandplanstogetto100,000by2015end.
WSRetail,setupbySachinandBinnyBansalin2010,held
mostofitsinventoryandisthecompany'slargestsellerithad
salesofRs3,135crorein2013/14.Thefoundershavenow
divestedtheirstake.AndFlipkartflippedfrombeingan
inventoryledmodeltobeingamarketplacein2013."Flipkart
isnowa100percentmarketplace.Thelargestsellerin
differentcategoriesisnotthesameguy,"saysNagori.
Flipkarthasitseyesonthenextbig
verticalafterelectronicsandfashion
Peopledon'tgotoAmazon
togrowitsselection.Theseare
foracrazysale.Buttheydo
India'slargestecommerce
toFlipkartandSnapdeal.
categories,accountingforabout82
MaheshMurthy
ManagingPartner,Seedfund
percentofGMV.Accordingto
MorganStanley,34percentofFlipkart'sGMVasof2014is
electronics,followedby30percentfromapparel.Now,it
wantstotestthemarketforhomeandfurniture,saysMukesh
Bansal."Therearealotofactivitiesplanned,"hesays.He
estimatesthissliceofthemarketat$20billion."Today,our
furnituredeliveryisverydifficult.Theexperienceisnot
smooth.Sowearelookingtoinnovateandsubstantially
improvethesupplychain,"hesays.Ofcourse,thatwouldbring
FlipkartintocompetitionwithPepperfryandUrbanLadder,no
meanwarriorsthemselves.Butthatisanotherstory.
Snapdealisoilingthethirdlegoftheecommercemachine
fasterdelivery.Halfofitsordersareshippedthroughits
fulfilmentcentres.Thatreducestimetodelivery,while
improvinghomogeneityofpackaging.Thecompanyhaspicked
upanundisclosedstakeinsupplychaincompanyGoJavasthat
ispresentinmorethan100Indiancities."Oursaleswere
growingfasterthanthecapacityofthirdpartylogistics
companies,"Bahlsays.ThestakewillhelpGoJavasscaleup
whileprovidingSnapdealwithvisibilityinunderservedroutes
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andcapacity.
Flipkartisbankingontechnologyandautomationtodosame
daydeliveries,withinafewhoursoftheorderbeingplaced,ina
fewcategories.Thereistalkthatthecompanyisworkingwith
kiranastores,muchlikeAmazon,butnodetailsareknownyet.
"That'showFMCGwillbesoldinIndiawheresmalland
mediumenterprisesfulfilorders,"isallthatFlipkart'sNagoriis
willingtosay.
AndwhatofAmazon?Thecompanyrecentlylaunchedaservice
titled'KiranaNow'withafocusoneverydayessentials
deliveredintwotofourhours.Thelogicissimple:forproducts
toreachfast,itneedstobeclosertothecustomer.Itcan'tget
closerthanthekiranastore."Wearecurrentlydoingapilotfor
24hours.Thekiranastorethatcanserveonekmcannowserve
fivekmusingourtools.Theyhavesoftwareavailabletothem
thatconnectstotheAmazonplatformandwemanagethe
logisticsandafterlogistics,"saysAgarwal.Thisisaservicethat
willtaketimetoperfectandscalebutAmazon,meanwhile,is
tappingthekiranastoresforadifferentreasonaswell.Kiranas
thathaveexcessspacecannowregisterwithAmazonand
functionasdeliverycentresandpickuppointsfororders.
BothAmazonandSnapdealwanttounseatFlipkartasmarket
leader.Flipkartknowsthatwellandistryingtocomeupwith
freshideastomaintainitslead.Theecommercespaceis
unforgivingandtypicallyonlyoneplayersurvives.Even
fundingdriesupasmarketsharesslip.
Amazonwillbehappytoplaythewaitinggame,saystrategists.
Itwillwaitforitsrivalstoburnout.Thisiswhatthecompany
didintheUS.Inarecenttalk,ScottGalloway,thefounderof
L2,athinktankfordigitalinnovation,andClinicalProfessorof
MarketingattheNYUSternSchoolofBusiness,saidthatno
companyintheworldhaseverhadaccesstocheapcapitalina
wayAmazondidandnowtheyaretakingadvantageofit.

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