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Amazon India is still second to Flipkart (and is likely to stay so) despite a fast-growing market share, a recent Bank of America – Merrill Lynch report said.
“We now expect Amazon’s GMV market share to improve to 37 percent by 2019 from 21 percent in 2015 and expect it to be a close no 2. behind Flipkart,” analysts wrote in a note dated September 13. The original prediction for Amazon in 2019 was for a market share of 31 percent.
Flipkart’s market share in 2019 will stand at 44 percent, as per the brokerage firm. Snapdeal is expected to lose some ground and be at 9 percent (earlier projection was for 10 percent).
Most of Amazon’s gains have come at the expense of Snapdeal, not Flipkart.
The note also says that Amazon’s India unit will make for over one-fifth of the online retail giant’s total international sales by 2025 – US$81 billion in gross merchandise value (GMV) and US$2.2 billion in operating profits. That would make India its second largest market after the United States.
The analysts estimate India GMV will hit US$5.5 billion in 2016 (from US$3.7 billion last year).
On the face of it, Amazon’s India growth can bring cheer to Jeff Bezos, who has gone all out to woo this important market for his company – including investing billions to get ahead of local rival Flipkart.
See: Why Amazon needs to win in India, ASAP
The problem is, Amazon has been trying to topple Flipkart for some time now, and if we look past the flashy numbers in the BofA report, what is implicit is that, while Amazon continues to grow at a sonic pace in India, it still won’t be able to overtake Flipkart – till 2019 at least.
In the world of ecommerce, three years is a long time.
While Amazon’s market share is increasing and Flipkart is stagnant, there is still a good 7 percentage points to make up for the Seattle-based company. BofA estimates it is already losing as much as US$1 billion in India annually as of date.
Even at conservative estimates, that is a burn rate of around US$2 billion straight up till 2019, and more added till they can get to the top spot and minimize that churn – considering a scenario where Flipkart continues at the same pace of non-growth.
See: Amazon is closing in on Flipkart. Jeff Bezos describes how he got there
“In our view, if other Indian ecommerce companies do not continuously innovate and receive timely adequate funding, then we see potential for Amazon to emerge as the number one ecommerce platform in India. Indeed, for the last couple of months, Amazon India gross sales are higher than that of Flipkart standalone (excludes Myntra),” the BofA note says.
That, however, is a big ask – it is evident that short of being cash strapped or bought out (unlikely for Flipkart at its US$11 billion valuation), Indian companies will not stop innovating for themselves. As soon as Amazon launched its Prime subscription in India, Flipkart and Snapdeal have launched similar programs, Flipkart Advantage and Snapdeal Gold.
“Flipkart still remains the market leader in India with a market share of about 43 percent. Even though Amazon has been gaining share, most of its gains have come at the expense of Snapdeal and other sellers,” the analysts wrote.
Add to that the fact that Alibaba is already circling India and plans to set up ecommerce shop by next year, and Amazon’s challenges are likely to increase rather than let up in the near future.
See: A Jack Ma vs Jeff Bezos showdown is imminent in India
This post Bad luck, Bezos. Amazon India’s not toppling Flipkart anytime soon appeared first on Tech in Asia.
from Tech in Asia https://www.techinasia.com/amazon-india-grows-in-size
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