 "Discount war brewing as Amazon, Flipkart fight for market share")
While Flipkart's $4 billion war chest and Amazon's seemingly endless cash train into India might not see discounts to the level of what was seen in the past few years, a discount war is definitely brewing. Paytm Mall, which will become aggressive this festive season has already indicated that the online deals its consumers get would also be available from its offline partners.
With exclusive deals and lower prices than most offline counterparts, these companies will look to expand e-commerce shopper base this festive season.
While unit economics might be on the rise, all of India's e-commerce giants are far from turning profitable. With the need of the day being to expand the base of online shoppers beyond the claimed 60-100 million people, discounts continue to be the largest attractor.
For shoppers who've been online for a while now, both companies are also looking at retaining them with better service rather than merely discounts, making for a two-pronged strategy. These companies also would incentivise customers to shop repeatedly, hoping to create a habit for customers to remain on their platform.
Anil Kumar, CEO at RedSeer Consulting, says that with the data e-commerce majors have today they will market a few fast-selling products at massive discounts, drawing customers to their platforms, while the rest of the products will be priced attractively enough to be bought. However, the days of indiscriminate discounting are over.
"The overall unit economics have improved quite a bit over the last two years. The burn for the industry has come down to around 15 per cent of the gross GMV which used by almost 28-30 per cent a year and a half ago," added Kumar. "Right now they are offering some of these exclusive deals and things like that which was not the case a few years ago."
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This festive season will also be the first time Amazon faces Japanese investor Softbank Group, which has deep pockets to sustain businesses long term.
With its massive investment of $ 2.5 billion in Flipkart, taking an equal stake in Flipkart as US-based venture capital fund Tiger Global, and becoming.the biggest stakeholder in Paytm's parent company, One97 Communications, Softbank has two large fronts opened against Amazon.
Even though it has written off its billion dollar investment in Snapdeal, the Masayoshi Son-led firm still has a 33 per cent stake in the company as well as two board seats. It effectively means that it has the three largest e-commerce companies in the country by its side.
"Now Softbank has the biggest mobile wallet and fin-tech company in India, as well as the biggest online marketplace. It will now use these two to fight Amazon in the country. While Snapdeal bet did not pay, Softbank is sure few years down the line when the investee companies go public, they would be worth at least $50 billion to $60 billion dollars," said industry expert and Droom Founder and CEO, Sandeep Aggarwal.
Discount season
- India’s e-shoppers are in for a treat this festive season as Flipkart and Amazon fight it out to reach new customers and grab market share
- India may not see the deep discount wars of the past few years, yet a discount war is brewing
- Paytm Mall, which will become aggressive this festive season, has indicated that its online deals will also be available from its offline partners
- India’s e-commerce giants are far from turning profitable
