Diwali sale: Flipkart & Amazon in a war of words
Flipkart took a jibe at Amazon by saying the numbers didn‘t come by selling memberships or small ticket items such as â€˜hing, churan or besan‘.
Post the mega festive sales last week, e-commerce giants Amazon and Flipkart are at war again. This time, it is war of words on who performed better.
During the five-day ‘Big Billion Sales’ run by Flipkart, the company reported 15.5 million units sold. This was slightly ahead of 15 million sold by Amazon during its five-day-long ‘Great Indian Festival’.
While the numbers already indicate that Flipkart fared better than the US-headquartered rival, it went a notch ahead, by taking a jibe at Amazon by saying the numbers didn’t come by selling memberships or small ticket items such as ‘hing, churan or besan’.
In response to which Amazon has stated that this (selling of small ticket items) marks a fundamental shift in the way purchases were happening online. Amazon was also selling consumables and grocery items during its Great Indian Festival sale.
"We are very excited that customers all across India trust us to buy everything from their spices to home appliances to clothes to upgrading their mobile to jewellery," Amit Agarwal, Amazon’s India head told Moneycontrol.
Flipkart said that 99 percent of their units sold were above Rs 200 selling price and 95 percent above Rs 300 selling price. On the other hand, the pricing of grocery items, such as hing, churan or besan are broadly expected to be in the sub Rs 100 domain.
Snapdeal, however, chose to remain silent on the e-commerce numbers war. It reported about 11 million units sold in last week’s sale.
Why Flipkart v/s Amazon battle is important
Flipkart’s reported win in the pre-Diwali sales also indicates a last-ditch effort by an Indian startup to avoid letting an MNC conquer the e-commerce bastion.
Walmart and Alibaba are already eyeing the Indian e-tailing segment. Alibaba has bought a stake in Snapdeal, while Walmart was reported to be in talks for a strategic investment in Flipkart.
In other verticals such as online search and social media, companies like WhatsApp, Facebook and Google dominate having long beaten Indian rivals. Uber is also locked into a pitch battle with Softbank-funded Ola, in the taxi space.
Winning the e-commerce game however remains critical for Indian startups, who are being threatened by MNC domination in most other segments.
Overall the online retail market is expected to increase to USD48 billion to USD60 billion by 2020 from USD4.47 billion in 2014, says a UBS report.
The total number of online shoppers in India are expected to grow to 175 million and the gross merchandise value (GMV) to spike to USD60 billion by 2020, according to a June report by Google Inc and consulting firm AT Kearney.
Is grocery the new way to up e-commerce valuations?
An ideal comparison during the festive season should not just the number of orders but also the average order value, according to Sreedhar Prasad, partner, e-commerce and start-ups at KPMG in India. None of the e-commerce companies however have disclosed the value of their transactions so far.
Talking about Amazon's claim of a shift in the way people purchase online, Prasad said that there has been an increase in adoption of membership-based e-commerce services today.
Bangalore-based research firm Redseer has predicted that the overall GMV for all online retailers for the month of October 2016 will be Rs 11,000 crore to Rs 13,000 crore (USD1.7 billion-USD1.9 billion), even as the companies have not been declaring numbers. This is against sales of Rs 9,000 crore registered during October 2015.
For once, Flipkart announced that it recorded USD 200 million worth of goods sold on a single day of the sales – the highest-ever single-day sale in the history of the company.
Another analyst on the condition of anonymity also said that by selling a lot of household goods and groceries at a discounted price, Amazon is capturing a wallet share of the monthly household purchase of consumer in the metros. It will help Amazon in the long run when they plan to expand their grocery delivery business, he said.
Amazon has been betting big on its Prime membership, a global service which it launched in India in July.
According to IBEF the potential market size of the online grocery market is of around USD 10 billion (Rs 60,000 crore). Only a fraction of it has been reached till now with a handful of grocery startups such as BigBasket and Grofers having made a mark. Most startups such as PepperTap, LocalBanya, Grocerywalk, and ShopVeg have downed shutters in this space.
However to up the number of unit sales, adding churan and hing doesn’t seem a bad idea for the horizontal e-tailers.