It has been 5 years since Amazon came to India, loaded with $5 Billion worth of committed investment to establish amongst the then home-grown marketplace, Flipkart and Snapdeal. In no time Amazon expanded its wings. Since its inception in June 2013, Amazon has grown both in terms of scale and brand value. Though it may seem to be a simple strategy,
More Units sold => More Customers => More Brand Value
It hasn’t worked as well for many others; brand value is developed through marketing which is not limited to mere advertisements. It is also to come real on those promises and exceed customer expectations in due course. Instead of just fulfilling the customer needs, Amazon is vying to provide customer delight. It is very difficult to make each customer happy but you can attempt to satisfy your customers by adding value to your offerings at the same price point.
There are various customer-centric steps taken by Amazon. These include quick response Customer care team, average product rating criteria wherein Amazon suspends extremely poor rated products, quick & free delivery for Prime products, add-on purchase features like book delivery or leave with neighbour, the latest subscribe & save deliveries, Amazon Pay convenience, early deal access for Prime members, AZ Guarantee, best in class packaging and that’s not it, add-on value services like Amazon Prime Video, Prime Music, Kindle, Alexa, Prime Now, Fire TV.
These add-on value services & products offered can be divided into 3 categories:
- Services: 2 day delivery on Prime products, 2-hour deliveries on Amazon Now groceries store, Amazon Pay wallet.
- Assortment: More depth and width (Merchandising and Assortment), Alexa, Amazon Basics (headphones to office chairs), Solimo, Kindle, firetv stick, Myx, Symbol, 10.or etc.
- Digital Content: Amazon Prime Video (original domestic content as well), Prime Music.
Many of these benefits and value services are coupled with annual ₹999/- Prime membership. Amazon Prime includes video and music content with additional buying and product delivery based benefits. Amazon has grown beyond the marketplace model; hence, it will be wrong to call it just a marketplace for buying goods. This appears to be the competitive advantage for Amazon’s rapid expansion, which is shrinking space for others in the market. They are playing the cards right through product diversification and this is also visible in their vision and mission statement:
“Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online”
The strategy is right or not, time will tell but Indian E-commerce seems to be in for a new showdown between Amazon and Walmart with Flipkart’s acquisition. With Walmart’s expertise in offline retail and the successful changes it made to its US strategy, Walmart might not stay too far behind for too long. The firm might also utilize Flipkart and its strong ecosystem in India (Myntra, Jabong, PhonePe etc.) to export ideas to the rest of the business offerings.
Just like Amazon, Flipkart has also been developing private label brands such as Roadster, MarQ, Perfect Homes etc. These private label brands can help improve the profitability of these marketplaces in the long run.
When these companies will start looking to move past the revenue growth and towards unit economics, the market will move towards stabilization. However, given the rivalry between these US-based behemoths as well as with other international players such as China’s Alibaba (with its payments subsidiary Alipay holds more than 50% stake in Paytm Mall) this stabilization period might get further delayed.
With a population of 1.3 billion & rising affluence, India is one of the most appealing retail markets currently. As the opportunities for these players are expanding, Indian consumers need to gear up for the upcoming shopping spree offered by these marketplaces. With a bouquet of services aimed at the target segments, Amazon seems to be ahead of the pack. However, for how long will it keep investing & diversifying these services apart from the marketplace could determine the success it is aiming for and how well the other players counter this threat is an interesting development to keep tabs on in this ‘Battle of Giants’.
Author: Shaleen Mishra
PGPM, Class of 2019, Great Lakes, Gurgaon