One category that stands between Amazon.com and the No. 1 crown in India is apparel and fashion—the second-largest contributor to India’s $19.6-billion online sales.
The Seattle-based giant has a 31 percent share in the Indian market compared with Flipkart Ltd.’s 32 percent, according to a report by Forrester. But the gap widens when Flipkart Group-owned fashion retailers Myntra and Jabong are accounted for. India’s largest e-commerce company’s total share then goes up to 39.5 percent.
“Fashion remains the only category where Flipkart has a significant edge due to its acquisition of Myntra and Jabong,” Satish Meena, a senior forecast analyst at Forrester told BloombergQuint over the phone from New Delhi. Amazon needs to invest aggressively and add more products for a customer to consider it as a platform for fashion, he said.
India’s online retail market is witnessing a three-way fight between Jeff Bezos-led Amazon, SoftBank-backed Flipkart and Alibaba-supported Paytm Mall. Growing smartphone penetration in the world’s second-largest telecom market has prompted more people to buy online. Rising incomes and two-thirds of population below 35 years is driving consumption, even from smaller cities and towns. Sales are led by mobile phones, and apparel and lifestyle.
Amazon’s share in fashion is a third of the Flipkart Group including Myntra and Jabong. The Seattle-based giant missed one opportunity by not acquiring Jabong, Arvind Singhal, chairman and managing director at retail consultancy Technopak Advisors, said. “Now they can’t think of any other company they can acquire with significant traction. They have to build up the category slowly and steadily.”
Flipkart disputed the findings of the survey. They are “incorrect” and “do not reflect ground realities”, a company spokesperson said in an emailed response. Flipkart claimed it had 60 percent of the overall market share. That, it said, derived from its dominant lead in smartphones, electronics, large appliances, and fashion and increasing share in fast-moving categories such as home and general merchandise.
Forrester doesn’t agree. Flipkart maintains its lead in categories like smartphones and fashion, its report said. But Amazon leads in categories like grocery, appliances, media and electronics.
And Bezos isn’t going easy. He has pledged to invest $5 billion in India. Flipkart too has built a war chest. It’s reportedly in talks to team up with Walmart Inc for a $7-billion investment after raising $4-billion last year from SoftBank Vision Fund, and Microsoft Corp, Tencent Holdinds and Ebay in two separate rounds.
Amazon said in an emailed response that its fashion store is among the top three on its India platform and brings in the second highest number of new customers. The company will continue to invest in inputs that matter to our customers and build this category, it said.
Tide Is Turning
The real growth now will come from grocery, said Singhal. Sales of staples and food items contributed nearly $450 billion or two-thirds to India’s overall retail market in 2016, according to India Brand Equity Foundation, a government-backed think tank. The potential is huge as online grocery still accounts for a fraction of these sales.
“Grocery is a much bigger category than fashion where Amazon is significantly ahead of Flipkart,” said Singhal. “Whoever can get the grocery right will be the market leader. In a year or two, we might see Flipkart catching up.”
Amazon and Flipkart are vying with Alibaba-backed BigBasket and SoftBank-backed Grofers. Meena of Forrester pegged Amazon’s grocery sales in 2017 at $180-200 million.
Its popularity is rising too. Amazon emerged as the leader among metro consumers in a Forrester survey of 2,000 respondents in nine cities in 2017. It found that 80 percent shopped on Amazon while 65 percent shopped on Flipkart.
Indian Online Retail Market
The Indian e-commerce industry has slowed down over the last two years. It grew at 26.4 percent in 2017 compared to 39 percent in 2016 and over 100 percent in the previous two years, according to the report. New guidelines for foreign direct investment in e-commerce, demonetisation, Goods and Services Tax led to a decline in consumer spending.
Forrester expects the online retail market in India to grow an annualise rate of 29.2 percent to cross $73 billion in 2022. That would be nearly 5.7 percent of India’s $1.3-trillion retail market.
Smartphones will continue to drive growth as they accounted for the 40 percent of the overall sales across platforms in 2017, followed by fashion which accounted for about 18 percent.
Flipkart (including Myntra and Jabong) with 39.5 percent share leads the market, followed by Amazon (31 percent), Paytm Mall (5.6 percent), Snapdeal (2.5 percent) and Shopclues (2.1 percent).