Amazon may dominate Indian e-commerce market in long run, says report

Bengaluru: With a rapid increase in the number of internet users in India Amazon India is likely to dominant e-commerce market, in the long run, a report by Silicon Valley venture capital firm Kleiner Perkins Caufield Byers shows the growing trend of internet users.

The report suggests that the number of internet users has grown 40% over the past year to about 355 million. It also pointed to Amazon’s rate of growth and investments in the country over the past three-and-a-half years. The company has plans to overtake Flipkart by investing at least $5 billion in India. Amazon said it posted an 85% increase in gross sales volumes in last three months from March.

Amazon’s adverstising for marketing strategy is feasible in Indian market. Moreover, its subscription programme Prime, launched in July 2016 is helping it retain many existing customers and getting them to spend more. Although the overall online retail market continues to grow at a slow pace, experts pointed out that Amazon has “patient capital” at its disposal and can afford to wait 10-20 years for the number of regular, purchasing users to touch critical mass.

“Amazon has done a great job in India so far-they’ve adapted to the local market very well. Some of their solutions from there (in the US), they are customising those for what makes sense here. And they’re leveraging their great knowledge and capital,” said Sandeep Murthy, a partner at venture capital firm Lightbox Ventures Management Ltd.

Flipkart and the American retailer are now neck-and-neck and the battle between the two will be much more closely fought this year compared with most of the last year, as per Mint’s report.

In fact, for July and August last year, Amazon briefly overtook Flipkart. Experts also pointed out that while Amazon has the luxury of pools of capital at its disposal, rivals such as Flipkart and Paytm also have significant firepower from deep-pocketed investors such as Tencent Holdings Ltd, Alibaba Group Holdings Ltd, Tiger Global Management and SoftBank Group Corp.

“The challenging thing about e-commerce though is that if you look globally, there are only 12 companies that have over a billion (dollars) in revenue, over a billion in market value and are public. In India, you have at least four (companies) fighting for that position,” said Murthy.

In Indian market as the number of internet users are increasing rapidly, it doesn’t seem a similar growth in ecommerce market. “We are also in a market and business today where we don’t have the consumption capacity yet to merit the level of spending that has gone in. We need to have consumption growth first-until then it’s a bit of a waiting game,” said Murthy.

“And during that waiting game, it’s a question of who has the staying power. The fortunate thing for Flipkart is that they have Tencent in their backyard, Paytm has Alibaba and Amazon being Amazon is a good thing. So, we now have some staying power. Now it’s about waiting and watching,” added Murthy.

On 27 December,it was reported that the ecommerce market is set to show little or no growth in 2017, raising worry about the potential of the e-commerce market relative to the rosy projections of investors who have put billions of dollars into Flipkart, Snapdeal and other Internet start-ups.