Amazon India Caught in Slow Lane

E-commerce is not what it was before 2020. However, Amazon India is stuck in the slow lane, in the pre-pandemic world, which has left the company behind, even though we are talking about Amazon, which has all the resources in the world at its disposal.

So why hasn’t Amazon done what Flipkart is doing now, what BigBasket is banking on, what JioMart wants to do and what Blinkit, Zepto and Instamart seem so sure of? Why isn’t Amazon in the flash trading game, and even if it jumps in now, will it be too little, too late?

We attempt to answer these questions, but after taking a look at the in-depth analysis of three Indian giants from the past week:

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Amazon India can’t handle fast-paced trade

No one would have noticed that Amazon doesn’t have a fast commerce service if it weren’t for the past year. Zepto says its revenues grew more than five-fold to over INR 10,000 Cr in FY24 from around INR 2,000 Cr in FY23, while Blinkit’s revenues stood at over INR 2,300 Cr in FY24 from INR 730 Cr in FY23.

These gains have not gone unnoticed, although it is understood that the year-over-year growth is only so dramatic due to the relatively small size of the market to date and the fact that, until fiscal year 2024, only a handful of players offered the fast trading service.

Amid increasing competition, we expect the growth rate of major players — namely Swiggy Instamart, Zepto and Blinkit — to slow down even as others gain market share.

In fact, most analysts believe that the 2024 holiday season will be the first real test of whether fast-paced commerce is ready for a major transformation. We already know that platforms have expanded into Tier II and smaller cities to find new customers for the holiday season.

With this in mind, Amazon’s absence from the express commerce market could prove to be a major strategic failure.

But Flipkart sees the benefits

Complicating matters is the fact that Flipkart is bullish on Minutes, which went from a pilot to a nationwide launch fairly quickly. Tata-owned BigBasket is also moving to a pure FRE format and will soon shift from slotted deliveries to an on-demand model.

The importance of fast commerce is obvious, given that Flipkart wants to start with 100 stores. This kind of commitment underscores the fact that fast commerce has moved from product-market fit to scale.

According to data from 1Lattice and Datum Intelligence, India’s e-commerce market grew by 18-20% in value terms in the first half of this year, with grocery sales up over 38%, driven mainly by a surge in short-term trading.

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

According to 1Lattice, nearly 40% of online grocery sales now come from QSRs, which once again highlights why Amazon needs to focus on QSR for its existing Amazon Fresh business, which is stuck on two-hour delivery.

In addition, instant commerce platforms now have the scale and clout to sign deals with D2C and emerging brands, which puts Amazon at an even greater disadvantage.

D2C brand Drools CEO Shashank Sinha had said at Inc42’s D2C Summit last month that Flipkart Minutes will outdo other players in QSR in smaller cities, given the Flipkart brand’s exit. Similarly, Swiss Beauty co-founder Mohit Goyal highlighted that QSR has become the preferred way to shop for emergency beauty products, a category that was never served before 10-minute deliveries.

Some might say that Amazon has already missed the bus.

Fast Trading on a Rising Wave

According to UBS, Blinkit is the market leader in India 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 massive marketing machines, will certainly have an advantage when it comes to acquiring users for fast trading.

So how much space will Amazon have, even if it delays the introduction of the new service, as was announced at the end of August?

Worse still, Amazon is also losing revenue from non-food categories. For fast-paced retail startups, categories like home and kitchen appliances, electronics, and smartphones (like the iPhone 16) are the biggest areas of interest.

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

This was also the case with Flipkart before it decided to invest in Minutes. Amazon needs to get its act together and may be starting to do so.

This week, Amit Agarwal, Amazon’s senior vice president of emerging markets, announced that veteran Amazonian Samir Kumar will take over responsibility for running India as country manager, replacing Manish Tiwary, who resigned in August and will leave 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 over at a critical juncture. He will oversee other key Amazon India executives — Saurabh Srivastava (categories), Harsh Goyal (daily essentials), Amit Nanda (market) and Aastha Jain (growth initiatives).

These executives face the difficult task of ensuring that Amazon’s e-commerce investments in India do not go to waste.

What could really hurt Amazon is the fact that fast-paced retail companies dominate in metropolitan cities, where Amazon has an advantage over Flipkart. Losing ground here not only hurts Amazon in the short term, but also undermines its advantage over its long-time rival.

Over the past few years, Amazon has focused on AWS as a revenue channel for the Indian market, especially as startups have grown in scale and stature. However, for most Indians, Amazon is an online shopping destination first and a video streaming service second, and most may not even know what AWS is.

Any stumble on the e-commerce 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.

This festive season will be an unprecedented experience for Amazon India. It is no longer about competing with Flipkart, as it was till 2023. Yes, Meesho entered the game in 2023, but the festive season of 2024 will be the first time Amazon will have to compete with about half a dozen well-capitalized and scaled companies for market share.

Will Amazon India and its new management handle this group? It will definitely end in fireworks – one way or another.

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