Amazon India Caught In Slow Lane

Ecommerce is not what it used to be before 2020. But Amazon India is stuck in the slow lane, in a pre-pandemic world, which has put the company on a backfoot, even though it is Amazon we are talking about with all the resources of the world at its disposal.

So why has Amazon not done what Flipkart is doing now, what BigBasket is betting big on, what JioMart wants to do and what Blinkit, Zepto and Instamart seem to be so sure about? Why is Amazon not in the quick commerce game, and even if it does jump in now, will it be too little too late?

We try to answer these questions, but after a look at these deep-dive into three Indian giants from the past week:

• Into Swiggy’s Core: Alongside cofounders Nandan Reddy and Phani Kishan, cofounder and CEO Sriharsha Majety has built a team that sees quite a few experienced professionals from the world of ecommerce, consultancy and technology products. Here are the people taking the food delivery giant to the IPO pole 
• Myntra’s GenZ Mantra: With a sharp focus on India’s growing Generation Z base, fashion giant Myntra has not only added new features to its platform but is also looking at exclusive brand partnerships specifically for a younger audience. Will this help Myntra win over GenZ loyalty?
• Who’s Navigating Shiprocket? The Zomato-backed unicorn has gone from a third-party logistics tech player to a one-stop ecommerce enabler with a range of services for merchants and large FMCG companies. But who are the people steering the company beyond the INR 1,000 Cr+ revenue milestone? Here’s a look

Amazon India’s Quick Commerce Miss 

No one would have batted an eye at Amazon not having a quick commerce service if it wasn’t for the past year. Zepto claims its revenue has grown over five-fold to over INR 10,000 Cr in FY24 from about INR 2,000 Cr in FY23, while Blinkit’s revenue for FY24 was over INR 2,300 Cr as against INR 730 Cr in FY23.

These gains have not gone unnoticed, even though there is an acknowledgement that the YoY growth is only this explosive because of the relatively small size of the market thus far, and the fact that only a few players were offering the quick commerce service till FY24.

With competition increasing, we expect the growth rate to slow down for the primary players — i.e Swiggy Instamart, Zepto and Blinkit — even as others catch up on market share.

In fact, most analysts believe that the 2024 festive season will be the first real test of whether quick commerce is ready for the big transition. We already know that platforms have expanded to Tier II and smaller cities in a bid to find new customers for the festive season.

Given this, Amazon’s absence from the quick commerce market could be a major strategic failure.

But Flipkart Sees The Merit

Complicating matters is that Flipkart is bullish on Minutes, which has gone from a pilot to a nationwide launch rather soon. Tata-owned BigBasket is also moving to a quick commerce-only format, and will transition from slotted deliveries to the on-demand model soon.

The significance of quick commerce is clear from the fact that Flipkart wants to start off operations with 100 stores. That kind of commitment underlines the fact that quick commerce has gone from the product-market fit stage to the scale-up stage.

India’s ecommerce market grew 18-20% by value in the first six months of this year, with grocery sales surging over 38%, driven largely by a sharp uptick in quick commerce, according to data sourced by 1Lattice and Datum Intelligence.

In a research note published in August, brokerage firm UBS said Flipkart has an advantage of supply chain when it comes to Minutes and this is why the company is banking on the strategy of lower pricing as a market entry plan.

As per 1Lattice, almost 40% of online grocery sales now come from quick commerce, which again underscores why Amazon needs to focus on quick commerce for the existing Amazon Fresh vertical, which is stuck on two-hour delivery.

Plus, now quick commerce platforms have the right scale and leverage to sign up deals with D2C and new-age brands, which puts Amazon further on the backfoot.

D2C brand Drools CEO Shashank Sinha said at Inc42’s D2C Summit last month that Flipkart Minutes will outdo other quick commerce players in smaller towns and cities given the brand recall for Flipkart. Similarly, Swiss Beauty cofounder Mohit Goyal highlighted that quick commerce has become the preferred mode for emergency beauty purchases, a category that was never being catered to before 10-minute deliveries.

So some might say Amazon has already missed the bus.

Quick Commerce On The Ascendancy

According to UBS, Blinkit leads the India market with 40%-45% market share as of July 2024, followed by Swiggy Instamart (20-25%), Zepto (15-20%) and BigBasket (10-15%). Flipkart, with its massive user base and huge marketing machinery, will certainly enjoy an advantage when it comes to acquiring users for quick commerce.

So, how much room will Amazon have, even if it makes a belated entry, as was reported in late August.

And to make matters worse, Amazon is also losing out in terms of revenue from non-grocery categories. For quick commerce startups, categories such as household and kitchen equipment, electronics, smartphones (iPhone 16, for example) are the biggest focus areas.

They want the consumer to only order from quick commerce platforms for all their online shopping needs. This festive season, most QC platforms are expected to offer more than 20,000 SKUs. And with this expansion into new categories, quick commerce players are eating Amazon’s lunch.

That was the case with Flipkart as well, before the company decided to invest in Minutes. Amazon needs to read the room, and perhaps it’s starting to do so.

This week, Amit Agarwal, Amazon’s SVP for emerging markets, announced that Amazon veteran Samir Kumar will take on the responsibility to lead India as the country manager, replacing Manish Tiwary, who stepped down in August and will transition out of the company in October.

The new country head, who has been with Amazon since 1999, was an integral part of the team that launched Amazon India in 2013, and now Kumar has to take the reins at a critical juncture. He will oversee Amazon India’s other key executives — Saurabh Srivastava (categories), Harsh Goyal (everyday essentials), Amit Nanda (marketplace), and Aastha Jain (growth initiatives).

These executives have the tough job of ensuring that Amazon’s ecommerce investments in India are not in vain.

What could really hurt Amazon is that quick commerce companies dominate in the metros, where Amazon has a lead over Flipkart. Losing ground here is not just damaging for Amazon in the short term but also erodes its moat over its long-time rival.

In the past few years, Amazon has focussed on AWS as a revenue channel for the Indian market, particularly as startups grew in scale and stature. But for most Indians, Amazon is the online shopping destination first, and then a video streaming service, and most might not even know what AWS is.

Any slip on the ecommerce front will be very damaging for Amazon as a brand in India. It will also hurt its Prime Video business which many users get bundled with Amazon Prime subscriptions.

For Amazon India, this festive season is going to be an unprecedented experience. It’s no longer about competing with Flipkart, like it was till 2023. Yes, Meesho entered the picture in 2023, but the 2024 festive season will be the first time that Amazon will have to compete with about half-a-dozen well-capitalised and scaled-up companies for market share.

Can Amazon India and its new leadership tackle this cohort? It’s certainly going to end in fireworks — one way or the other.

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