Flashback to a couple of years ago to take a look at the state of organised retail in India.
The legacy retail chains were struggling to stay afloat. Flipkart was floundering after a few heady years of growth. Amazon made no bones about its ambitions to “own” e-commerce in India—it not only announced grand investment plans for India but actually followed up by putting its money where its mouth is. Billions of dollars in investment to double down on Amazon’s world-beating technology, muscle and awe-inspiring marketing playbook. So, it was nothing but a matter of time before it emerged as the undisputed leader of Indian e-tail. A certainty that would happen sooner rather than later.
Flashforward to today. While Amazon has admittedly progressed well in terms of building a customer base in India, even its most ardent fans would readily agree that it is by no means a slam-dunk. Unlike in the US, its home market, where it is said to own over 80% of market share in several major categories—from electronics and health to food and household essentials—Amazon is nowhere near as dominant in India in any of these individual categories, much less on an overall basis.
So what explains its apparent failure to emerge as the undisputed leader in Indian e-tail?
For one thing, Flipkart turned out to be a far more formidable adversary than most observers thought. Not only did it stave off Amazon by maintaining and even extending its lead in key categories such as electronics and fashion, allying with Walmart was a veritable coup that struck a dagger deep into Amazon’s heart as far as its ambitions in India went. On one hand, there was the tactical win of getting access to a far larger pool of patient capital than was thought possible a few years back—Walmart’s billions were a more-than-adequate hedge against Amazon’s “shock and awe” tactic of using billions of dollars from its balance sheet to fund unprofitable expansion in India and wipe out all competitive threats by sheer brute force. More importantly, Flipkart became the de facto vehicle for Walmart’s entry into India, effectively converting the country into a new attritional battlefront for Amazon and Walmart to tango in. An addition to the multi-pronged global war between the two retail behemoths. This essentially meant that any hopes for a quick victory in India that Amazon might have had were well and truly gone.
While there were categories like electronics and fashion where Flipkart has had a strong presence, there was one sector where it was not present at all. A major category that Amazon should have, in theory, found it easy to swoop into and own.
Food is an important category for multiple reasons but primarily for the sheer size of the market opportunity. By most estimates, as much as two-thirds of India’s total retail expenditure is on food and groceries.