First Post – Flipkart doing an Amazon? Analysts don’t think it’s a good idea

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Last month Indian e-commerce giant Flipkart launched its indigenous tablet brand – Digiflip Pro – to take on similar products from competitors like Google and Amazon. The move is the latest in a series of Flipkart initiatives that seem uncannily similar to its biggest market rival, Amazon India.

From services launched in quick succession like same-day and next-day delivery to in-house products to Flipkart First-a subscription service with benefits for consumers (similar to Amazon Prime), it looks like the Indian e-commerce site has been following Amazon’s trail rather too closely. This should not be surprising. Amazon has a global footprint in services, logistics and products. Flipkart is battling for a piece of the e-commerce market that NASSCOM predicts will hit $100 billion by 2020.

Now, for some statistics. With a team strength of 13,000, Flipkart has 18 million registered users and 3.5 million daily visit. With technology-support, it is able to transact 5 million shipments per month. Now contrast this with Junglee.com, a price-comparison platform by Amazon: It has listing of over 30 million products across 25 categories, over 14 million monthly visits. And, it is rated the number one online comparison shopping site by Com Score for four quarters in a row. Is it any wonder then that Flipkart wants to ape its success strategy?

Inspiration or replication?
But there’s a fine line between inspiration and replication, say analysts. Ashish Jhalani, founder of consultancy group eTailing India, said that Flipkart may look like it is copying Amazon’s services but what it’s actually doing is just replicating a model that has had proven success in multiple markets-the model just happens to be Amazon’s. However, he does caution against blindly implementing all services – “Flipkart must pick and choose what makes sense for India,” Jhalani said. He gave Flipkart the benefit of the doubt by saying that perhaps the recent tablet move wasn’t replication and that the company was just looking to expand its product offerings.

Ruchi Sally, director and head – retail advisory & services, Elargir Solutions, isn’t as kind to Sachin Bansal and the company’s tablet strategy. “It is a plain copycat move by Flipkart to counter Amazon’s invasion into the Indian e-commerce space,” Sally said in an email reponse. Elargir’s analysts are not gung-ho about Flipkart’s tablet as the volume the site is looking to garner is purely domestic while the Amazon Kindle (its rival) has a global appeal and market. “There is no distinct advantage-be it brand recognition, customer stickiness, repeat purchases or fat bottom line accruing to Flipkart on account of dominance by players like Amazon, Apple, Samsung and other China-sourced Indian marketed brands in the tablet business,” Sally added.

Similarly, for Flipkart First, Sally said that though the service may provide additional revenues for the company, it will not sustain in the long run if Amazon’s basic services start to threaten Flipkart First’s benefits.

Sally expanded on her reasons for a ‘no go’ on the copycat strategy. According to her, Flipkart has limited experience of six to seven years and is not yet mature enough to sustain business strategies adopted by the large market leader. Furthermore, innovation is the key to attract customers and local-centric innovation is required to continue in the game – like Flipkart’s Cash-on-Delivery service which gave it access to a massive Indian market that wasn’t comfortable with sharing banking details online and where credit and debit card penetration was low.

Technopak consultancy group’s chairman Arvind Singhal is another industry-watcher who believes India-centric innovation is the way to go forward. He said replicating one another is not advisable, adding that, “All companies can learn from each other but first they must figure out what they want to be. Don’t become Amazon-clones is my advice.”

According to Singhal, companies should innovate in a way that sets them apart from the competition and benefits customers without hurting the company’s balance sheets.

One of the many ways to innovate is to look at untappedcustomer segments – a practice that usually leads to specialty websites that deal only in certain verticals like fashion or furniture.

Remaining relevant
All the three analysts believe that the Indian e-commerce space is not going to become an exclusive Amazon Vs Flipkart saga. The size and breadth of consumer demands will facilitate the growth of several smaller but successful e-tailing sites. Flipkart’s recent Rs 2,200 crore acquisition of Myntra, a purely fashion site, is proof that becoming a big player in a niche category is just as important as being the leader across a range of categories.

Sally said that every player is going to remain relevant as long as it continues to address niche consumer demands and add value. “E-commerce sites like makemytrip (for travel tickets), baby product sites (like babyoye), groceries stores (like localbanya.com, ekkart.com), eyewear sits (eg: lenskart.com) have carved a niche presence in the market and will continue to see growth momentum,” she said.

Her thoughts were echoed by Singhal who said that Flipkart would be wise to pay attention to smaller players who could prove worthy competition across certain verticals. “It’s too risky to focus only on Amazon,” he said.

Several of India’s industrial houses like the Tatas and Birlas could also enter the e-commerce space and provide Flipkart with some healthy competition, Singhal said. “Reliance has already announced its plans and other conglomerates already have bandwidth, customers and things like a strong telecom presence to help push their online plans. Also, don’t forget, these companies aren’t constrained by any FDI norms,” he said.

Jhalani added that while keeping an eye on Amazon, Flipkart should also be wary of international players looking to enter the Indian market like Japanese e-commerce site Rakuten, China behemoth Alibaba and US retailer Walmart.

Another way for Flipkart to play up its position as a leading Indian e-commerce platform would be to focus on running its investee companies instead of shutting them down, Sally said. “Let’s be mindful that Flipkart has acquired companies like Chakpak, LetsBuy and later shut them down. Every acquisition directly or indirectly through Accel Partners or the New York hedge fund and Tiger Global (VC) hints at merging the ‘not so well’ performing entity with a larger one,” she said.

Singhal has more general advice to all players in the e-commerce sector – chill out. “This is just the beginning of a long marathon, not a 100 m dash. When you have to dig in for the long haul, you need periodic breaks to assess whether your plans are working, especially since the entire sector is pretty much uncharted territory,” he said.

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