Amazon falls behind Walmart in the battle for online shoppers in India

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Walmart is beating Amazon in the battle for online consumers in India, a rare e-commerce victory for a US retailer known for selling low-cost products in essential stores.

Walmart inked the most expensive e-commerce deal in history to enter the Indian market in 2018, paying $16 billion for a 77% stake in Flipkart, an online retailer founded by former Amazon employees in the country’s most populous country. world.

The deal was criticized by analysts who expressed concern over Flipkart’s losses and Indian regulations designed to protect traditional retailers. Flipkart’s achievements in the intervening years serve to justify Walmart’s decision to pay top dollar for the Indian opportunity.

“Did Walmart overpay for Flipkart at the time? YES. But were they able to get value for their money in the intervening years? Yes,” said Abhishek Goyal, co-founder of data firm Tracxn and a former executive at Accel Partners, Flipkart’s first institutional backer. “If you look at the global markets, there was no other mature e-commerce company that could help Walmart compete with Amazon Flipkart was the only viable resource.

Flipkart’s valuation increased to $38 billion in 2021 after raising an additional $4.8 billion in stock, including an undisclosed additional amount from Walmart and investments from the likes of SoftBank of Japan and sovereign wealth fund GIC of Singapore.

India has become a key battleground for Walmart and Amazon as both have struggled to compete in China against local players such as Alibaba Group and JD.com. The story was similar in other fast-growing Asian markets, where companies like Singapore’s Shopee and Lazada and Indonesia’s Tokopedia, Blibli and Bukalapak proved to be formidable competitors. India’s e-commerce sales are expected to triple to $135 billion from 2020 to 2025, according to Bernstein’s research, about the same as in Southeast Asia.

Thanks to the Flipkart deal, Walmart is seen as the industry leader in India, although neither it nor Amazon makes any money from its online operations and both have lost market share in recent years as local conglomerates like Reliance Industries and Tata Group have grown by more active.

Flipkart’s market share was 48% last year and Amazon’s was 26%, according to research firm Redseer Strategy. Bernstein estimated that Flipkart had gross sales of $23 billion in India during 2021, while Amazon grossed $18 billion to $20 billion.

This article is taken from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, economics, business and international affairs. Our correspondents and external commentators from around the world share their insights on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest-growing publicly traded companies from 11 economies outside Japan.

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Redseer’s figures suggest that Flipkart has grown faster than Amazon in India. It calculates that Flipkart gross sales increased 40% year over year in 2021 and 23% in 2022. Comparable figures for Amazon were 26% and 10%.

“Amazon has a significant gap with Flipkart, and potentially the gap could widen, making it really difficult for them to close, at least in the short term,” said Mrigank Gutgutia, partner at Redseer.

Amazon said “the data on Amazon” in the Redseer report was “incorrect” but did not disclose its estimates of its Indian market share. He added, “Amazon is the most visited and trusted online shopping destination in India. Our customers across the country trust Amazon to buy what they need from categories such as smartphones, electronics, fashion and beauty, home and kitchen, and everyday essentials. We are excited about the future of our business in India and remain focused on delivering and innovating for our customers, vendors, partners, brands and employees.”

Flipkart declined to comment on its market share and sales growth.

Industry observers said Flipkart has carved out a niche in smaller cities with a huge assortment of inexpensive products and offerings like Shopsy, an app launched in 2021 to target value-conscious shoppers with extremely affordable products. He also owns Myntra, a popular online fashion store.

Amazon, which will mark its 10th anniversary in India in June, has gained popularity among wealthier urban Indians thanks to Prime, a subscription service that offers faster delivery, discounts and video streaming. But it lags behind Flipkart in categories like mobile phones, fashion, electronics and home appliances which accounted for around 70% of India’s online retail market in 2022, according to Redseer. Both it and Amazon track Tata Group’s BigBasket in grocery sales.

“The problem for Amazon is that their Prime members are also buying fashion from Myntra and groceries from BigBasket,” said Satish Meena, an independent e-commerce consultant. “The idea was that if someone is a Prime member, they will be a committed Amazon customer, but that hasn’t happened yet.”

Walmart and Amazon have both spent heavily building their Indian presence, occasionally engaging in superiority action. In July 2014, Amazon revealed a $2 billion investment just one day after Flipkart announced a $1 billion fundraiser, the largest by an Indian start-up at the time.

The competition has been costly. Losses at Flipkart Internet, which operates its marketplace, rose 51% to 43.62 billion rupees ($532 million) in fiscal 2022. At Amazon Seller Services, the owner of its Indian marketplace, losses are amounted to 36.49 billion rupees, down 23.1% from last year.

Questions about Amazon’s commitment to India were raised after its April earnings report failed to mention the country for the first time in five years. Amazon, which is cutting 27,000 jobs globally in response to slowing sales growth, has shut down its food delivery, online education, wholesale distribution and fledgling book publishing operations in India.

“Amazon isn’t pumping in too much money, (but) they aren’t starving it (operations in India),” Tracxn’s Goyal said. “They’re letting the situation sort itself out.”

For their part, the American owners of Flipkart have pledged to stay the course in India. Judith McKenna, chief executive officer of Walmart International, told analysts in February, “India’s fundamentals remain strong and, in fact, are continually strengthening.”

A version of this article was first published by Nikkei Asia on May 12, 2023. ©2023 Nikkei Inc. All rights reserved.

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