Low prices, discounts, direct selling are some strategies employed by the Amazon for driving its reign on Indian e-commerce whereas for Flipkart the underlying strategy is advertising based revenue model.
Amazon and Flipkart like other e-commerce stores have only one goal of dominating the Indian e-commerce market. Both are India’s biggest e-commerce firms and are supposed to operate as marketplaces where small merchants can connect with buyers from every part of the world. None of them is allowed to sell directly to shoppers but both firms are taking advantage of the loopholes in corporate law to deploy the best mixture of the marketplace and direct-selling business model.
According to the latest reports, with the help of a joint venture Amazon is trying to increase its direct selling component and is trying to do whatever it takes to conquer the last and biggest unconquered e-commerce territory of the world after it lost to Alibaba in China.
Amazon’s policy is simple. In order to have a wide range of products and to serve customers better it is necessary to have its own products along with the products from the merchants. Competition among various merchants on the e-commerce platform trying to sell the same product also leads to low prices on the e-commerce portal.
Amazon’s success can be greatly attributed to its own set of principles and its ability to uphold all these principles in order to serve Indian customers better. But in order to meet its own principles Amazon decided to have more control over its supply than normally what a pure marketplace should allow because merchants are struggling to meet Amazon’s standards.
Started by two former Amazon employees Flipkart was launched in 2007 in India it started as a book retailer but gradually all kinds of products to its inventory.
In spite of raising $2.6 billion in the past 18 months, it is expected to make huge losses due to its heavy discounting strategy. Flipkart believes that the Indian market resembles closely to that of China instead of the US and also due to the success of Alibaba’s IPO they changed the strategy to an advertising-driven revenue model.
Under this model, Flipkart plans to operate as a marketplace and aims to earn its revenue from advertising and various other services such as logistics and warehousing charges.
Flipkart’s transformation from an inventory based to an ad-driven model is quite complex and to this point, it is not clear that whether it will generate the expected profit or not.
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On the other hand, Amazon is also facing similar challenges by staying true to its low price and wider product assortment principles. Also, Amazon’s complex business model as a marketplace and direct selling entity is another great challenge before Amazon can reign in the Indian e-commerce market.
Grabbing the market share is the current goal of these e-commerce firms and is a short-term goal as well because at some point both of these have to come up with some viable business structure and model in order to satisfy their backers.
In the case of Flipkart, it is Tiger Global Management and in the case of Amazon, it is Jeff Bezos (Founder and Co) and its shareholders.