Amazon, Flipkart In Festive Sales War: What’s Happening And How They Have Prepared

Come the festive season, and India gears up for large-scale online shopping festivals, which have never shown any sign of slowing down. If truth be told, online and mobile shopping has grown exponentially as the pandemic redefined consumer behaviour.

Google pioneered the Great Online Shopping Festival (GOSF) in December 2012 to bring forth Indian shopping platforms (nascent businesses at the time) and offer deeply discounted products to online shoppers.

It was an Indian version of the hugely popular Black Friday Sale in the US, or the Singles’ Day right before the Chinese New Year. But the programme was discontinued in 2015 as Google said that the market was ripe with several ecommerce companies.

Cut to present, and one would find two biggest ecommerce marketplaces — Amazon India with 850K+ sellers and Flipkart with 375K+ sellers — fighting a cut-throat battle to take complete control of the ecommerce market in India. And there is no better time to lock horns in a battle of supremacy than the big fat Indian festive season.

Just like every year, Amazon India and Flipkart, each with a 30% market share, have dropped the bomb this season, offering jaw-dropping deals, deep discounts, curated products and early-access deals to Prime and Plus subscribers.

Flipkart’s 7th edition of The Big Billion Days (BBD) Sale and Amazon India’s 4th edition of The Great Indian Festival (GIF) were originally planned for October 7 and October 4, respectively. But both started on October 3, highlighting the intensity of the battle royal to grab the biggest share of online shoppers. In fact, both companies changed the dates multiple times to gain the upper hand and get more bargainers, aka buyers.

The Indian ecommerce industry is pegged to reach $200 Bn by 2027. The year 2020 was a terrifying year for brick-and-mortar retailers as the Covid-19 pandemic brought all physical businesses to a grinding halt. So, most sellers jumped on the online shopping bandwagon, and the country is finally easing into a new normal. This trend gets reflected in the market intelligence reports for the ongoing festive season.

A RedSeer report says that Amazon, Flipkart and other ecommerce platforms are expected to clock more than $9 Bn GMV in the 2021 festive season, a 23% rise compared to $7.4 Bn grossed in 2020.

On the other hand, a Forrester report expects $9.2 Bn in sales during the 2021 festive month, up 42% year over year from the previous estimate of $6.5 Bn in 2020.

From the total estimated GMV, reports have predicted that the ecommerce giants are likely to clock 70% of the sales in the first week of the festive season (October 3-10).

“Since its launch in 2014, Flipkart has led spending during the festive month due to its strength in the smartphone and fashion categories, which account for over 50% of total online retail sales in India. Meanwhile, Amazon is focusing on its Prime members to buy in more categories and buy more frequently during this month,” the Forrester report states.

According to the company, smartphones and fashion will account for 50% of total sales in the festive month of 2021, allowing Flipkart to maintain its lead.

In 2020, Redseer had pegged Flipkart’s and Amazon’s festive season sales at $4.1 Bn, but the ecommerce giants claimed to have reached that target in just five days. Total net sales grew by 55% YoY to reach $4.1 Bn in 2020, from $2.7 Bn in 2019.

The marketing research platform also stated that India’s online festive season sales in October-November 2020 raked in $8.3 Bn in gross sales, and Flipkart led the season with 66% of the total sales.

 

Cut To 2021: Day 1 Numbers On Face Value

The date of sale coincided this year, with premium subscribers getting 24-hour early access on both platforms. Like every year, Amazon India will be running its festive season sale a month, but Flipkart’s BBD will last for eight days (unlike the regular five days), with multiple sales coming up until Diwali (November 4).

According to a Business Standard report, 2 Mn customers pre-booked close to 5 Mn products during Flipkart’s early-access sale, a 40% increase from 2020. Flipkart is also planning to onboard 420K sellers by December 2021, the company said.

Amazon claims to have seen a 60% increase in its early-access deals compared to GIF 2020.

“During Prime Early Access on October 2, the number of local shops participating in the event more than doubled compared to last year. We also saw a 60% increase in sellers who received their highest-ever single-day sales year-on-year on Amazon. The number of sellers receiving an order from Tier 2/3 cities jumped by 21%. Also, 16% more sellers received orders compared to last year,” Amazon India’s vice-president Manish Tiwary told Inc42 in an emailed response.

“Prime subscription continues to be a customer favourite across India. Two out of three new Prime sign-ups are coming from Tier 2-3 cities, and customers are shopping in eight Indian languages,” he said.

It is important to note that in July 2021, Japanese conglomerate SoftBank Group and several other institutional investors pumped $3.6 Bn into Flipkart ahead of the festive sales. Only a part of that funding, around $600 Mn, has been kept for ESOP buybacks, while the rest has been reportedly invested in building a war chest for the Flipkart Group — Flipkart, Myntra, Shopsy and their logistics partner Ekart.

On the other hand, Amazon has expanded its fulfilment centres, increased seller acquisition and built cold storage to further the Amazon Fresh initiative.

Interestingly, the online sales festivals are longer limited to Amazon and Flipkart. Social commerce unicorn Meesho also announced the Maha Indian Shopping League, scheduled for October 6-9.

The company claims that it has onboarded 1 Lakh+ new sellers ahead of the four-day festive sale and expects 3x more daily orders from customers in Tier 2 cities. The startup recorded a revenue of INR 341.6 Cr in FY20, a 4x spike from the INR 84.8 Cr revenue in 2019.

Thanks to the festive season sale and a recent $570 Mn funding from Fidelity Management and B Capital Group, Meesho has an adequate war chest to put a dent in the social commerce market worth $1.5-2 Bn gross market value.

The social commerce market, contending with traditional ecommerce, is estimated to grab 5% of the Indian ecommerce market. It is likely to grow at a CAGR of 65% between 2020 and 2025 and hit $60-70 Bn by 2030.

The Behind-The-Scene Story: Take A Look At The 4Ps That Matter

In the wake of toughening ecommerce regulation in India, a lot is happening behind the scenes, especially as the festive war gets intense.

Here is a look at how Amazon and Flipkart have honed their art of war for the current season and manoeuvred their way into the ecommerce space.

The People: Humans Who Make It Happen

For Amazon, the plans for the festive sales were laid right after the end of Prime Day Sale 2021 in July. Interestingly, the ecommerce giant claimed to have served 96% of Indian pin codes during that event. Later, it surveyed 1,900+ registered sellers that joined Amazon during the first week of September.

The study revealed that Amazon and its third-party sellers planned to launch new products in several categories, to ramp up the platform for the festive season sale. They also focussed on seasonal hiring and personnel training to meet supply-side requirements and invested in inventory management and warehousing.

According to Flipkart’s series called Humans of BBD, the festive sale has helped platform sellers achieve up to 5x growth. Enthused by the outcome, Flipkart sellers are also expanding warehouse support, hiring seasonal workers and endeavouring to become an integral part of the country’s burgeoning ecommerce ecosystem.

Both platforms say that they have seller training programmes and other tools such as webinars and videos in place “to help SMBs reach their true potential”.

Amazon is hiring 110K seasonal workers to meet the growing demand, while Flipkart boasts creating 115K additional seasonal jobs to strengthen its supply chain network ahead of the festive season. The latter has also launched its gig workers’ onboarding platform.

Promotion To Spearhead Shopping Experience

Both Amazon and Flipkart kicked off their commercials and sales campaigns from September 20, focussing on deep discounting and asking potential customers to make ‘wishlists’. They excelled in creating FOMO (fear of missing out) among shoppers looking for great deals, and tapped into customers’ sentiment by offering curated gifts for the festive season.

Amazon has partnered with HDFC Bank to provide a 10% discount on pre-payments or EMIs, while Flipkart has joined hands with Axis Bank and ICICI Bank for additional discounts.

Although Amazon has been involved in now-on, now-off controversies regarding its fashion offerings mainly due to poor and unguided apparel buying experience (it also drew flak for launching China-based ecommerce platform Shein), it may have become too lucrative to miss. The company claims to offer up to 80% discount in this segment.

Flipkart’s association with Bollywood celebrities Ranbir Kapoor and Alia Bhatt, who provide curated fashion lists, gives it an edge in this space. Other celebs, including Virat Kohli, Kalki Koechlin, Madhuri Dixit, Mahesh Babu, Soha Ali Khan, Saina Nehwal and Ranveer Brar, have also joined Flipkart as its brand ambassadors.

The platforms have reportedly earmarked a corpus of INR 350 Cr for brand promotion by celebrities on TV, radio, print and social media. Amazon will also showcase a significant number of non-celeb commercials.

Amazon’s sales events will also include 1,000+ product launches from popular consumer electronics companies and other brands like Samsung, OnePlus, Xiaomi, Sony, Apple, boAt, Lenovo, HP, Asus, Fossil, Levi’s, Bosch and others, the company said in a statement.

Flipkart, on its website, also promises ‘craziest-ever price’ on Apple and RealMe products. Carl Pei’s Nothing Earbuds and laptops and smart TVs from Nokia are exclusively available on Flipkart, giving it an edge besides 10K+ product launches.

The Place: Fulfilment Centres, Delivery Hubs and More

As far as infrastructure investments go, Amazon India has expanded its fulfilment centre network. The company claims to have increased its storage capacity by 40%, with 60+ fulfilment centres in 15 states offering 43 Mn cubic ft space to its sellers.

The ecommerce marketplace also introduced installation services for the large appliances category in 370 cities and furniture in 200 cities across the country. Besides, it has added 28K+ neighbourhood kirana partners in 420+ cities to provide grocery delivery services.

Flipkart claims to have added 66 large-scale fulfilment and sortation centres across the country in the past few months, taking the total to 110+. To ensure seamless last-mile deliveries, it has added 1,000 delivery hubs and is currently expanding its partnership with kirana shops. Earlier, the company tied up with 100K+ kirana stores.

The Price: Who Wins And Who Loses

This is the most sensitive element of the entire ecommerce game, given the recent controversies, protests and regulatory measures, which have left all stakeholders in the lurch. Understandably, we are not discussing the all-too-obvious deep discounting aspect of product pricing, but the allegation of predatory pricing that often leaves small sellers on these platforms high and dry.

Figuratively speaking, the price here actually indicates the price paid by the ecommerce giants still trying to cope with the new rules.

In June 2021, the government made proposals to tighten the norms for ecommerce marketplaces like Amazon India and Walmart-owned Flipkart through the draft ecommerce policy, banning flash sales, ending preferential advantage to vested or related-party vendors, making provisions to display each product’s country of origin and displaying alternative products before customers make purchases “to ensure a fair opportunity for domestic goods.”

Post these proposals, Amazon India raised concerns about the rules hurting its sellers while Flipkart maintained that it complies with the FDI aspect of the draft ecommerce rules, refraining to comment on other aspects of the bill.

“[The related-party transaction clause in the amendment rules] can impact the sale of retailers like Amazon. It will not be able to sell its products under brand names such as AmazonBasics, Cloudtail or sell through other brands where it holds a stake,” Gayathri Prajit, founding partner of Chelton Legal, told Inc42.

“The lack of clarity on what defines a ‘flash sale’ has also left ecommerce giants in flux, making it difficult to continue business as usual. This may also hurt small businesses trying to sell their products on these platforms and gain profit from these sales,” she added.

Ecommerce Is Booming, But Where Does India Stand Globally?

Online sales and shopping festivals might be thriving as never before, but this year, these gala events coincide with troubled times. Both Flipkart and Amazon are currently under the scanner of the Competition Commission of India (CCI) for allegedly promoting select sellers on their platforms and adopting business practices that stifle competition.

Besides the stringent draft ecommerce rules, the Confederation of All India Traders (CAIT) has launched a month-long national campaign against the ecommerce giants, alleging monopoly and lobbying. It has sought a CCI probe and most recently, an intervention from PM Narendra Modi.

But there are more hitches. The ecommerce industry is all about retail aggregation, but lately, both Amazon and Flipkart are facing competition from the fast-growing genre of retailers — the direct-to-consumer brands.

According to an Inc42 Plus report, the Indian D2C market is expected to triple from $33.1 Bn in 2020 to $100 Bn by 2025 on the back of the projection that the number of online shoppers in India will reach 350 Mn by FY25, up from 128 Mn in FY21. India is now home to 800+ D2C brands and the number is increasing fast.

In a bid to ride the D2C wave through a collaborative approach, Flipkart is looking to nurture and invest in 100 D2C startups via its boost program. Amazon India has also launched the Amazon Global Selling Propel (AGSP) Accelerator in January 2021, to provide mentorship to online brands keen to expand globally, where it has undertaken a cohort of 10 D2C startups.

By bringing opportunities closer to D2C companies instead of treating them as typical competition, the ecommerce behemoths may soon create a win-win situation where entrepreneurs stay in control of their sales and revenues while platform players benefit from the brands’ marketing expansions, think experts.

It is essential to iron out these anomalies at the earliest if India is to emerge as a value and volume player in ecommerce sales. In spite of its exponential growth, the country is lagging far behind the sales clocked during Black Friday or the Chinese New Year, the biggest and busiest shopping occasion in those countries.

Consider this. The entire Indian ecommerce market saw a GMV under $7 Bn during the 30-day festive season in 2020 while the single-day Black Friday sales accounted for a $9 Bn+ GMV last year, with Amazon US claiming to amass $4.8 Bn in sales.

Or consider the ecommerce market in China, a highly competitive space dominated by ecommerce giants like Alibaba and JD. During the 11-day festive season sale before the Chinese New Year on November 11, Alibaba and JD claimed to have clocked $74 Bn and $41 Bn in sales, respectively.

Ecommerce and festive sales online have definitely seen an uptick, but India has to overcome many hurdles before catching up with global markets.

[Edited By Pooja Sareen and Sanghamitra Mandal]