Flipkart vs Snapdeal vs Amazon_ Battle of the Big Boys - Business Today

5/10/2015 FlipkartvsSnapdealvsAmazon:BattleofthebigboysBusinessToday

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Wewillget100,000

TheconversationwithAmazonIndia'scountrymanagerAmitAgarwalbeginswithhimdismissinghisrivals.Flipkart,India'slargestecommercecompany,doeseverythingAmazondoes,andviceversa,Ipointout.Thereislittleproductdifferentiation.

Agarwalsnapsback."Theyareaverylowbenchmark."

ColleaguescallAgarwala"TypeA"apersonalitytypethatpsychologistssayareexcessivelycompetitive,aggressive,workobsessed,successoriented,proactive,andmostlyworkaholic.NotjustAgarwal.AlmostallleaderswecomeacrossinIndia'snascentbutfastgrowingecommerceindustryfitthatdescription.Itisbecomingaslugfest.

Accordingtoa2014reportbyMorganStanley,threeplayershavepulledaheadinthehorizontalmarketplacerace.Flipkartleadswitha44percentshareofthe$6.3billionIndianecommercemarket,byGrossMerchandiseValue

GoutamDas Follow Edition:May24,2015

ThebattleofthebigboysFlipkartvsSnapdealvsAmazon



sellersbyDec2015:Flipkart'sAnkitNagori

Itisnotabouthavingallrestaurants:Foodpanda'sRohitChaddha

(GMV).SnapdealisNo.2with32percentshare,whileAmazon,alatestarterinIndiaitlaunchedinJune2013has15percent.Amazontouched$1billioninsalesin2014.Forthecompany,Indiaisthefastestgrowinginternationalmarkettoreachthatmark,injustoneandahalfyears.AmazondoesnotagreewiththeMorganStanleyreportonthedifferenceinGMVshare.

AndSnapdealCEOKunalBahlinsiststheracebetweenFlipkartandhiscompanyismuchcloser.TheMorganStanleyreportwaspublishedinFebruary,beforeSnapdealboughtFreeCharge,amobiletransactionscompany."Today,ifyouaddFreeCharge,whichisafewhundredmilliondollarsannually,itisreallyneckandneck,"Bahlsays."FlipkartandMyntrahadafiveyear,$500million,and10,000personheadstartonus.Today,itdoesnotseemsomeonehadaheadstartonus,"headds.Snapdealstartedin2010.BythetimeAmazonlaunchedinmid2013,FlipkartwasalreadynearinganannualGMVofabilliondollars.Flipkart,meanwhile,thinksitsfirstmoveradvantagewillholdgood."Flipkartasabrandhasveryhighconsumerinterest.Itisthemosttrustedonlineretailbrandinthecountry,"saysMukeshBansal,thecompany'sheadofecommerce."Wehavedeeperunderstandingofconsumers.BetweenFlipkartandMyntra,itwouldbemorethan50percentmarketshareofallconsumertransactionsinIndia,"headds.FoundersSachinandBinnyBansaldidnotspeaktoBTforthisarticle,butfourcompanyexecutivesspokeonFlipkart'sbehalf.

Meanwhile,revenuefiguresfromRegistrarofCompanies(RoC)doshowFlipkartremainsinlead.Flipkartdidn'thavemuchcompetitionin2007whenitstarted.Itsfoundersinitiallythoughtofaprice



comparisonwebsiteanaggregatorofecommercesites.ButtheysoonrealisedtherewerehardlyanyecommercesitesinIndia.SotheyfoundedFlipkartanditquicklypulledawayfromolderetailerssuchasIndiaplazabyinnovatingandofferingmanyfirsts24/7customersupport,cashondelivery,aswellasareturnpolicy.

Butthoseinnovationsarenowcommoditised.Everybigplayeroffersthesame.Allthreealsoadvertiseaggressivelyontelevisionandprinttobuildtheirbrandrecalltheyarebattlingtobethefirsttoannouncecategorylaunches,newservices,andfundingcompetingforglobaltalentwhiletakingpotshotsateach

otheronsocialmedia.

OnFebruary20,apictureofaFlipkartofficewithtworeceptionistsandanAmazonbrandedpackagelyinginonecornerwentviralonTwitter."Even@FlipkartOrdersfrom@Amazon!"thetweetread.Flipkartresponded:"Werecycledsaidpackagingasourreception'sdustbin."Twitteratisscreamedformoreblood."FlipkartandAmazon,gogetaknifeyouboth,let'sseewhowins,"apostsaid.AmazonIndiatweeted:"ThereisabitofAmazonineveryecommercecompany."



Therealknivesinthisbattlearemoredangerousthantweets.Accordingtoindustrysources,AmazonIndiahasdatascientistswhosejobistoonlyexecutestrategicpricingthatmakesFlipkartbleed.SellersonAmazonmayhave2,000refrigerators,forinstance.Itmayofferdeepdiscounton300ofthem.ThatwillprovokeFlipkarttodiscountfurtherandhenceadduptoitslosses."AmazonisusingitoutofdesigntomaximisethebleedingatFlipkart.Todaythegameisaboutwhohasthestaminatolastlonger,"saysanindustryveteranwhodoesnotwanttobeidentified.

Allthreearemarketplacesandsellersontheirplatformsdon'tnecessarilyagreetopricecutsthecompanieswantthetrioindulgein'gapfunding'.Theymakeupthedifferencebypayingsellersandchargingthecosttopromotionalexpenses.Whilecompaniesremaintightlipped,itiswidelybelievedthatFlipkart,SnapdealandAmazonburnmorethan$100millionofcasheverymonth.Flipkarthasthehighestcashburnratebutthenitalsoraisedthelargestamountsome$2.3billionsofar.Snapdealhasraisedcloseto$1billionin2014,whileAmazonIndiaisbackedbyaparentwhichhaspledged$2billioninvestmentintheIndianmarketplace.Allwillprobablyneedevenmoremoney.Towinmarketshare,allthreediscountconstantlyandaddtotheiralreadyhumungouslosses.Flipkart,in2013/14,ranlossesofRs400crorewhereasSnapdeallostRs265crore,andAmazonRs321crore.SomeestimatessayFlipkartandSnapdealhaveroughlyenoughcashtolastoutayearandahalfatcurrentburnrates.Andthiswarisunlikelytobesettledwithinthattimeperiod.

Whileallthreeappearlargelysimilartotheaveragecustomers,therearesubtledifferencesinofferingsandbusinessphilosophies."Peopledon'tgotoAmazonforacrazysale.ButtheydotoFlipkartandSnapdeal.Amazon'sphilosophyistoofferabetterproductateverydaylowprice.ButFlipkartandSnapdealareseenasdeepdiscountingsites,"saysMaheshMurthy,ManagingPartneratSeedfund,anearlystageventurecapitalcompany.



Q&A:We'llget100,000sellersbyDecember2015:Flipkart'sAnkitNagori

Snapdealinsistsitiswrongtoseeitasavanillaetailer.Itsaysittargetstheentireconsumptionecosystem."RetailinIndiaisa$500billionmarket,consumptionis$1.4trillion,andretailisasubsetofconsumption,"saysBahl."Whatcomesbetweenretailandconsumptionaretravel,utilitypayments,education,financialservices,etc.Thereisnoreasonadigitalecosystemshouldnotmakethosemoreefficient,"headds.Snapdeal'sacquisitionofmobiletransactioncompanyFreeChargeandRupeePower,amarketplaceforloans,creditcards,andfinancialservices,ispartofthatoverallstrategytobethebigplayerintheconsumptionspace,hesays.

Thebattleoftomorrow,itemerges,willbefoughtontwootherparameters.Therivalrywillbeaboutofferingnewandmoreselectionofproductandservices,andfasterdelivery.Lowprices,ofcourse,willcontinuetobeaprimarydriverbutallthethreeetailersareinnovatingtoreducetheseller'sexpenses.Thebighope:itwouldinducehimtosellcheaperallbyhimselfgapfundingand,thereby,cashburn,wouldslow.

AmazonhasplayedtheecommercegameformanymoreyearsthanbothFlipkartandSnapdealcombinedthecompanywasfoundedin1994inSeattle.ItsIndiateamsaysithasinplacethemostcomprehensiveplantoreducecashburn.Amazonhasbroughtinarangeofsellerservicesthathavebeentestedinmarketsglobally.Servicessuchas'PaywithAmazon'addressespaymentcosts.ItallowssellerstouseAmazon'spaymentinfrastructure,itscustomerbase,andthedeliveryaddressesontheirwebsite.Trafficcosts,similarly,areaddressedthroughsomeadproductswhile'FulfilledbyAmazon'givessellersaccesstowarehousespace,picking,packing,delivery,andreturnservices."Thereisaperunitrate.Allcapitalcoststhatlockupworkingcapitalhavebecomevariablecosts,"Agarwalsays.Iftheselleralreadyhasawarehouse,hecanjustusethecompany'sdeliverylogisticsthroughaproductcalled'Easy



Ship'.ThecompanyrecentlylaunchedAmazonbusiness.in,aseparatewebsiteforsmallandmediumbusinessestobuybulkquantitiesatwholesaleprices.Thisisabusinesstobusiness(B2B)marketplace,similartoAmazonsupply,theretailer'sindustrialbuyingventureintheUnitedStates.

"Wearetakingeverysinglecostelementoutoftheequation.Thatisabigdriveroflowpricestheonlysustainablewaytodrivelowprices,"saysAgarwal."Youcanlowerthepriceyourselfthroughdiscounting.Butyoucannotaffordtodoitforaverylongtime."

Q&A:We'llnevercompetewithoursellers:Snapdeal'sKunalBahl

WhileFlipkartandSnapdealofferfulfilmentservicesandotherproductstoeasesellercosts,neitherofthemhasquitethebouquetAmazondoes.However,bothareworkingtooffertheirsellerscheapercapital.

"Wearepartneringnonbankingfinancecompanies(NBFCs)wheresellerscansourcecapital.Wehavealreadyprovidedcapitaltomorethan50sellersaspartofthelendingpilot.WeprovidedataandriskprofilingtoNBFCs,"saysAnkitNagori,SeniorVicePresidentatFlipkart.Snapdealhasa'CapitalAssist'Programmeforsellerfinancing.Sellersgetfundedthroughamarketplacecreatedforthemwherelenderspartner.CEOKunalBahlsaysthecompanywouldhaveassistedloansworthRs100croretosmallbusinessesonitsplatform,andthusfar,thereisnononperformingasset."Thebusinessesborrowingarepaying100to150basispointslessthanwhattheywouldhaveotherwiseintheofflinemarket.Thattheypassontoconsumersaspricebenefit,"heexplains.

Alletailersareaggressivelystockinguponsellersandproducts.Snapdealisaddingoneproducttoitsselectionevery10seconds.Amazonhasabout700,000itemsinstocktodaythatcanbedeliveredthenextdayabout22millionproductsinitscatalogueoverall.Boththesecompanieshave100,000



Peopledon'tgotoAmazonforacrazysale.ButtheydotoFlipkartandSnapdeal.

MaheshMurthyManagingPartner,Seedfund

sellers(AmazonnumberincludessellersonJunglee,acomparisonsiteownedbythecompany'sUSparent).Flipkarthas30,000sellersandplanstogetto100,000by2015end.WSRetail,setupbySachinandBinnyBansalin2010,heldmostofitsinventoryandisthecompany'slargestsellerithadsalesofRs3,135crorein2013/14.Thefoundershavenowdivestedtheirstake.AndFlipkartflippedfrombeinganinventoryledmodeltobeingamarketplacein2013."Flipkartisnowa100percentmarketplace.Thelargestsellerindifferentcategoriesisnotthesameguy,"saysNagori.

Flipkarthasitseyesonthenextbigverticalafterelectronicsandfashiontogrowitsselection.TheseareIndia'slargestecommercecategories,accountingforabout82percentofGMV.AccordingtoMorganStanley,34percentofFlipkart'sGMVasof2014iselectronics,followedby30percentfromapparel.Now,itwantstotestthemarketforhomeandfurniture,saysMukeshBansal."Therearealotofactivitiesplanned,"hesays.Heestimatesthissliceofthemarketat$20billion."Today,ourfurnituredeliveryisverydifficult.Theexperienceisnotsmooth.Sowearelookingtoinnovateandsubstantiallyimprovethesupplychain,"hesays.Ofcourse,thatwouldbringFlipkartintocompetitionwithPepperfryandUrbanLadder,nomeanwarriorsthemselves.Butthatisanotherstory.

Snapdealisoilingthethirdlegoftheecommercemachinefasterdelivery.Halfofitsordersareshippedthroughitsfulfilmentcentres.Thatreducestimetodelivery,whileimprovinghomogeneityofpackaging.ThecompanyhaspickedupanundisclosedstakeinsupplychaincompanyGoJavasthatispresentinmorethan100Indiancities."Oursalesweregrowingfasterthanthecapacityofthirdpartylogisticscompanies,"Bahlsays.ThestakewillhelpGoJavasscaleupwhileprovidingSnapdealwithvisibilityinunderservedroutes



andcapacity.

Flipkartisbankingontechnologyandautomationtodosamedaydeliveries,withinafewhoursoftheorderbeingplaced,inafewcategories.Thereistalkthatthecompanyisworkingwithkiranastores,muchlikeAmazon,butnodetailsareknownyet."That'showFMCGwillbesoldinIndiawheresmallandmediumenterprisesfulfilorders,"isallthatFlipkart'sNagoriiswillingtosay.

AndwhatofAmazon?Thecompanyrecentlylaunchedaservicetitled'KiranaNow'withafocusoneverydayessentialsdeliveredintwotofourhours.Thelogicissimple:forproductstoreachfast,itneedstobeclosertothecustomer.Itcan'tgetcloserthanthekiranastore."Wearecurrentlydoingapilotfor24hours.Thekiranastorethatcanserveonekmcannowservefivekmusingourtools.TheyhavesoftwareavailabletothemthatconnectstotheAmazonplatformandwemanagethelogisticsandafterlogistics,"saysAgarwal.ThisisaservicethatwilltaketimetoperfectandscalebutAmazon,meanwhile,istappingthekiranastoresforadifferentreasonaswell.KiranasthathaveexcessspacecannowregisterwithAmazonandfunctionasdeliverycentresandpickuppointsfororders.

BothAmazonandSnapdealwanttounseatFlipkartasmarketleader.Flipkartknowsthatwellandistryingtocomeupwithfreshideastomaintainitslead.Theecommercespaceisunforgivingandtypicallyonlyoneplayersurvives.Evenfundingdriesupasmarketsharesslip.

Amazonwillbehappytoplaythewaitinggame,saystrategists.Itwillwaitforitsrivalstoburnout.ThisiswhatthecompanydidintheUS.Inarecenttalk,ScottGalloway,thefounderofL2,athinktankfordigitalinnovation,andClinicalProfessorofMarketingattheNYUSternSchoolofBusiness,saidthatnocompanyintheworldhaseverhadaccesstocheapcapitalinawayAmazondidandnowtheyaretakingadvantageofit.

Flipkart vs Snapdeal vs Amazon_ Battle of the Big Boys - Business Today

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