A VC firm was considering investing in an instant delivery startup in India about two years ago. This quick-commerce company had already succeeded in the South Asian market when few of its counterparts survived in developed Amazon markets.
Amazon’s Initial Reluctance
However, one concern was Amazon’s size, strength, and money: Could it take over this young sector? To rule that out, a partner at the fund called up some friends in leadership positions at Amazon who gave the impression that they weren’t planning a quick-commerce offering for India.
Amazon’s Missed Opportunity
In hindsight, this move by Amazon may have been misguided. Quick-commerce has gained ground rapidly across India, letting customers order items from groceries to electronics that can arrive within minutes. Blinkit from Zomato and Instamart by Swiggy are among the three largest quick-commerce firms in terms of sales, with Zepto being another major player; together, these companies will probably generate an annual revenue close to $4.5 billion – equivalent to about a quarter of what JM Financial estimates as Amazon India’s yearly turnover ($18bn).
The Rise of Quick-Commerce in India
India is home to more people than any other country and represents a key international market for American tech giants such as Apple or Google. Yet despite over $100 billion poured into various sectors over fifteen years (see table), we saw only around 12% growth last year, according to industry figures. At the same time, this might sound impressive given current global conditions where most markets have contracted significantly during the covid-19 pandemic period, etc. Overall size remains relatively small compared to potential demand, meaning the commerce sector grew by over x10 during the same period!
Amazon Impact on Traditional E-commerce Giants
These firms are “clearly taking share” from larger e-commerce companies, said Rahul Malhotra, an e-commerce analyst at Bernstein, adding that it’s raising questions about how traditional e-commerce giants will react.
Amazon Inaction and Market Evolution
Amazon needs to do more to address this opportunity. The company has not launched any quick-commerce offering; it has mocked firms that deliver “quickly” in its advertisements. This stance looks increasingly out of touch as the market evolves in developing countries like India.
Flipkart’s Strategic Response
Walmart-owned Flipkart, Amazon’s chief rival in India, has responded quicker, though some would argue it is still a tad late to the game. The company trails Amazon in urban Indian markets, but it launched its quick-commerce offering Flipkart Minutes this week. The move is seen as a strategic play to win over Amazon India’s urban customers.
Amazon Series of Fumbles in India
Analysts feel Amazon’s decision not to innovate quickly in this sector is only one of a series of fumbles in India. The company has been losing market share in the country for more than three years — a trend that has come into sharp focus following the abrupt resignation of Amazon India’s head, Manish Tiwary, earlier this week.
Competitors Capitalizing on Amazon Inaction
Meesho, a social commerce platform backed by SoftBank and Prosus, has made deep inroads in smaller Indian cities and towns over just a few years. Morgan Stanley analysts wrote this week that the firm now commands a more significant market share in the mobile app space than Amazon does in India. Flipkart’s apps have more than 50 million daily active users in India, whereas Amazon has fewer than 40 million, according to Bank of America analysts.
Challenges in E-Commerce Growth Amazon
E-commerce growth in India is increasingly driven by smaller cities, with 80% of Meesho’s customers coming from tier 2 and beyond, the startup said in a report Thursday. Tier 2+ cities outpaced larger urban centers in electronic accessory purchases for the firm, the report added.
A Matter of Priorities
Industry executives familiar with Amazon’s internal workings suggest that the e-commerce giant has changed its strategy in India. Under Andy Jassy’s leadership, the firm prioritizes its cloud business.
Regulatory Challenges and Missed Strategies
The last five years for the firm have been tough for other reasons, too. Amazon said that Rs’ reporting appeared to have relied on unsubstantiated, incomplete, and factually incorrect information. Then, the firm lost a high-profile battle to acquire Future Group, India’s second-largest retail chain at the time, to Reliance.
Amazon’s Attempts to Rebound
That’s not to say that Amazon hasn’t tried to scale and expand. The firm is still trying to make a dent in the mobile payments market in India with its Amazon Pay product, and it has also tried its hand at food delivery but ended up shutting that venture down. The company also closed its wholesale distribution business and forayed online education in the country.
Skepticism and Future Outlook
But an analyst who didn’t wish to be quoted said he was skeptical of Amazon’s ability to bounce back as the firm, which is still loss-making in India, has already spent too much capital building a certain kind of supply-chain system that can’t be molded overnight to meet the consumer’s changing shopping habits.
Amazon’s Response to Market Speculations
Asked to comment on its sales figure, an Amazon spokesperson instead claimed that the company’s data and external reports showed that Amazon is India’s “most trusted online shopping destination.” And that the information “shared by TechCrunch was factually incorrect and uncorroborated,” the spokesperson added.
