High-value shoppers prefer Flipkart over Amazon; but would Bezos win eventually?

Do you remember Flipkart’s co-founder Binny Bansal’s indirect jab at Amazon where he said, “We did not sell ‘churan’, ‘hing’…. We sold products…such as smartphones, LED and apparel’’? What Bansal had implied was that they sell big-ticket items, while its rival is busy selling groceries.

Well, he isn’t completely wrong. Because according to reports, the percentage of shoppers that place high-value orders frequent Flipkart more than Amazon.

Flipkart’s AOV higher than Amazon

RedSeer Consulting firm recently compared purchasing pattern of buyers across 5 shopping portals – Flipkart, Amazon, Snapdeal, Jabong and Myntra. This was done to determine the percentage of biggest spenders (above Rs. 5000) on each of these platforms between January and March 2017.

The Bansals-founded company ranked number 1 out of the 5 ecommerce platforms in terms of high average order-value (AOV). Below is the percentage breakup of buyers that purchased items worth more than Rs. 5000 in quarter 1 (January to March) of 2017 and quarter 4 (October to December) of 2016:

“High AOVs (average order value) are validation of investing best of customer on e-tailing portals. Going forward it should be a big lever for the growth of e-tailing industry,” assertedCEO of RedSeer, Anil Kumar.

But would Amazon be the one that would lead the ecommerce industry?

While Flipkart has a large number of big spenders, Amazon wins on the volume of transactions front.

In March 2017, Amazon India grabbed a higher market share compared to Flipkart in terms of volume of transactions. While Amazon’s share was 44.6%, home-grown etailer Flipkart stood at 35.7%, as per KalaGato Pte research report. The research firm reached to this conclusion after comparing data of more than 60 cities.

Industry watchers believe that Amazon is focusing on building a long-lasting business. The US-based ecommerce leader is doing that by investing heavily in India’s ecommerce infrastructure and introducing tried-and-tested strategies like Prime. And that’s why it might become the leader in the near future.

Reiterating the above sentiment, Sandeep Murthy from Lightbox Ventures stated,

“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 customizing those for what makes sense here. And they’re leveraging their great knowledge and capital.”

Flipkart is the current leader but Amazon managed to close the gap very swiftly. The American ecommerce giant’s gross sales have only been increasing with each year. While Amazon has deep-pockets and great in-house products, Flipkart has the backing of strong investors and a host of companies (Myntra, Jabong, Ekart, eBay and possibly Snapdeal) under its umbrella.

So whose battery life is long-lasting? Let’s wait and see.

Flipkart’s three constants: markdowns, mark-ups and top-level exits

Flipkart’s valuation and its managerial team, both are far from being steady. The ecommerce biggie’s share value keeps getting upgraded and downgraded by its investors. And top managers keep exiting the company, despite of the many positive developments such as Rs.9,000 crore funding,  acquisitions, and sale events.

Flipkart scores two mark-ups, two markdowns

Investors don’t think alike about Flipkart’s valuation because two financial services firms have downgraded its share value, while two others have increased it. As per the US Securities and Exchange Commission filing, the home-grown etailer’s shares were marked up by Morgan Stanley Institutional Fund & Vanguard Variable Insurance Fund and devalued by Fidelity Rutland Square Trust II & Valic.

Following are the recent changes in Flipkart’s value:

• Morgan Stanley increased the value of each share by 40%, from $50.51 in previous quarter to $70.68; putting the valuation at $7.5 billion
• Vanguard Variable increased the value of each share by 8.9% to $74.04; putting the valuation at$8 billion
• Valic decreased the value of each share from $95.83 in previous quarter to $94.27; putting the valuation at $8.5 billion
• Fidelity decreased the value of each share from $52.13 in previous quarter to $50.51; putting the valuation at $5.4 billion

In June 2016, Flipkart’s valuation stood at a whopping $15 billion. By April 2017, it slid down to $11.6 billion. Drop in valuation was due to the many markdowns by investors. In 2017 alone, the ecommerce leader has faced at least 5 devaluations.

Flipkart’s COO Nitin Seth resigns

Flipkart, which has already witnessed too many top-level exits, is hit by another resignation by a senior manager. Nitin Seth, Flipkart’s Chief Operating Office has left the company due to personal reasons. His responsibilities included looking after Ekart – Flipkart’s logistics arm, customer experience, HR and a range of corporate functions.

Those who reported to Seth would now have to report to Kalyan Krishnamurthy, Flipkart’s CEO.  A source confirmed,

“Ekart and corporate functions, that Seth was in charge of, will now report to Kalyan.”

Experts believe that top managers are leaving as Krisnamurthy is tightening his grip over the online marketplace. But won’t Flipkart need more experienced hands to look after the company once it acquires rival Snapdeal?

Snapdeal hit by another top executive exit; now Human Resources Head Saurabh Nigam puts in papers

Beleaguered online retailer Snapdeal continues to lose members from top leadership, the latest to join the list being its Human Resources Head Saurabh Nigam. Nigam’s exit comes amid talks of a potential sale of the e-commerce firm to larger rival Flipkart. A Snapdeal spokesperson confirmed the development.

“After spearheading Snapdeal’s Human Capital function for more than three years, Saurabh Nigam has decided to move on to pursue further career interests in a field close to his heart,” the spokesperson said in an e-mailed response. Post the transition, Pravin Kutty, Associate Vice President – HR and Administration, will head the Human Capital function, the spokesperson said.

Snapdeal, over the past many quarters, has seen exit of senior executives like Tony Navin, Sandeep Komaravelly, Anand Chandrasekaran, Abhishek Kumar and Amit Maheshwari. Nigam’s exit comes at a time when Snapdeal’s largest investor SoftBank has been proactively mediating a potential sale of Snapdeal to Flipkart for the last few weeks.

The Japanese investment firm, according to sources, has succeeded in getting board members to agree to the said sale and a term sheet for due diligence with Flipkart has been signed. One of the leading contenders in the Indian e-commerce space, Snapdeal has seen its fortunes failing amid strong competition from Amazon and Flipkart.

Compared to a valuation of about USD 6.5 billion in February 2016, the sale to Flipkart could see Snapdeal being valued at about USD 1 billion. The deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian ecommerce space.

Myntra forcing Jabong to sell private labels despite weak sales?

In an attempt to make higher sales and beat offline retailers, Myntra leveraged private brands. This is also expected to bring in higher revenue as the etailer reduces its dependence on heavy discounts. The etailer plans to do the same for its sister company Jabong.

Sellers on both portals claim that online fashion firm Myntra intends to turn Jabong into a platform for its private labels. HRX by Hrithik Roshan, Roadster and other in-house brands are now available on Jabong too. This makes one wonder about its long-term strategy for survival.

Jabong not happy with Myntra’s plan?

Based on their knowledge of the situation, a senior official of a brand on both Myntra and Jabong said, “Jabong’s team is not happy as the private brands don’t sell much but they (Myntra) are forcing Jabong to list private brands.”

Another seller claimed that there will be more private brands added to Jabong’s platform from Myntra.

Before its acquisition by Myntra last year, Jabong faced major losses that were difficult to cope with. It decided to delist most of its private brands and call itself a premium lifestyle platform. The company managed to bring down its losses making it attractive to many online retail players. Its new owner plans go completely against its loss reducing strategy and this could cost Jabong its profitability.

Jabong maintained an exclusive selection of global and Indian brands. The etailer introduced multiple foreign brands like Next, Topshop Topman, Missguided and Dorothy Perkins to the Indian market.

Upon acquisition, Myntra renegotiated Jabong’s contract with international brands and now also sells these global brands along with its parent company, Flipkart.

Has Myntra robbed Jabong’s exclusivity?

An anonymous Jabong and Myntra seller stated, “The private labels of Myntra have very large portfolios. For instance, if a regular brand has 3,000- 4,000 products, Myntra-owned brands have between 6,000 and 7,000 products.”

In response to this a spokesperson for Myntra said, “… the entire portfolio of our private brands is now available on Jabong, and not just unsold inventory.”

And added, “Jabong private labels will also be available on Myntra in a few months. This is part of our strategy to grow and cross promote our private labels on both platforms.”

A Jabong seller believes that Myntra has taken away its exclusivity title. The seller added, “Before its acquisition, Jabong’s unique proposition was its exclusive tie-ups with international brands. However, since Myntra took over, very few such associations have fructified.”

The Myntra spokesperson informed that its sister firm still has a strong portfolio of foreign brands. Since acquisition, Jabong has partnered with 16 international brands such as Esprit, Forever21, Aeropostale and others. But, none of those are exclusively available on Jabong.

According to the brand senior official mentioned at the start, “They are taking Jabong’s exclusive brands and listing them on Myntra. Exclusive brands are the differentiator and with this, the differentiator goes and there is no reason for consumers to come to Jabong.”

A competitor also sided with the seller saying that moves like these could eventually lead to the closure of Jabong.

Slow sales on Jabong Myntra’s fault?

Apparel brand, The Vanca’s, founder said, “… sales on Jabong have been down since its acquisition.”

Sales for the firm are much higher on Jabong than Myntra, but the latter claimed that this is just how business is and it has no intention of closing Jabong.

The Myntra spokesperson said, “There is a 30% customer overlap between Myntra and Jabong, which enables us to have access to a wider customer base through both platforms.”

But, everything’s not that bad at Jabong right?

According to reports, after Jabong’s acquisition the etailer saw a 50% hike in profits. It is expecting 40% growth during 2017-18. The etailer said it will invest in creating awareness about its brand. The ecommerce company also has plans of going offline to expand its presence in the retail market.

Zivame converting to single brand retail for FDI benefit?

In 2015, the Indian government loosened the FDI policy for single-brand etailers with foreign funding. The amendment to the policy now allows single brands backed by foreign investors to sell their products online. This has allowed many to expand their online retail approach.

Zivame, the online lingerie retailer, reached out to the government to turn its retail venture into one that focuses solely on a single brand. This it plans to do to benefit from the policy introduced in 2015, as mentioned above. The retailer’s parent company, Actoserba Active Wholesale, applied to the Department of Industrial Policy and Promotions (DIPP) for:

• Expansion of existing facilities
• Conversion of wholesale retail activities

According to the DIPP website, Actoserba Active Wholesale is doing this “to undertake single brand retail trading of Zivame branded products, including (through) ecommerce.”

Others single brand sellers in ecommerce

Benetton, the Italian fashion brand, has also applied to change to the single brand model and start its own ecommerce. The company’s chief executive in India, Sundeep Chugh said that the company is looking to create an omnichannel experience for customers in India this way.

Zivame carries out its omnichannel strategy through multiple fit studios it has setup across the country. The retailer has also added specialised Zivame Studios offering unique features. Could, a single brand approach help the etailer ensure the success of its omnichannel strategy?

Another etailer that moved to the single brand structure was Urban Ladder. The online furniture marketplace plans to stock and sell its products under its brand. The merchants on its platform will be converted from online sellers into contract manufacturers to allow this.

Others looking at changing to the single brand business are Yepme and FabAlly.