This article is written by a friend who is very familiar with the Indian ecommerce ecosystem. Due to fears of blowback, we agreed to let this person go by the pseudonym Viperomni.
All things – big and small – must come to an end, so goes the saying. In the cosmic sense of things so it will. But, for now, the Indian ecommerce ecosystem is a stalemate which is good for no one involved. Whether you are a buyer or a seller, marketplace or affiliate, ecosystem partner or a freelancer, enabler or aggregator, it does not matter because the only ones making hay are the media companies like Google and Facebook. Given the unbelievably large war chests that these two behemoths (Amazon and Flipkart) are toting around, no one else in the ecosystem has a chance to make it big.
The sellers call the shots
If you are a customer you are no longer spoilt for choice, prices are no longer as competitive as they used to be, what with the government coming down heavily on ecommerce companies for offering discounts beyond reasonable limits. In India, 100% Foreign Direct Investment or FDI is only allowed if it is a marketplace model. Which leads us to why Amazon has overwhelmingly favored the marketplace model in India as compared to other countries where the outright purchase model and sales or return (SOR) model still works well.
This, however, leads to dilution of product quality and service standards and also results in further erosion of consumer faith in the ecosystem. The fact that ecommerce in India has grown at such a poor rate when compared to smartphone penetration tells us a clear story.
Ecommerce in India has failed to go beyond the doorsteps of Tier I cities and educated middle class. It is the large Tier II and beyond that remains largely untapped and no one is looking to service these customers either through innovation in logistics or increasing adoption through reaching out through entrenched ecosystems.
If you are a merchant you cannot go and start selling on some new platform just because you do not like the payment terms of one of these guys. Given the atrocious payment terms of Flipkart, and the heavy losses they have suffered over the years, I have met so many merchants across India who swear never to sell on ecommerce again. Irrespective of region, education and awareness levels, product categories, merchants in India have been treated even more poorly compared to the customers. Most ecommerce players have delayed payments to the point where they did not pay merchants for years, ruining the business of SMEs who survive month to month.
Unscrupulous practices, and winner takes all mindset
Affiliates and ecosystem partners have been dealt the biggest blow through this consolidation in the market. Snapdeal was anyway poisoning the wells of price aggregators like Mysmartprice for a very long time by creating a separate window of access and giving wrong pricing on these sites. Once these sites led back to the main page, the rates used to change and the price aggregators never saw the commission they were supposed to receive.
There has never been a concept of keiretsu in India. No one has ever considered that their survival depends on everyone else in the ecosystem, paying lip-service to partnership models. Aggregators such as Browntape and Primaseller, once the gatekeepers to certain platforms and unscrupulous category managers who used to provide priority access to the walled gardens of these ecommerce marketplaces, have shut their shops. They are no longer able to generate any traction in a market where the two main competitors see no reason why they should humour powerful gatekeepers when they can keep the spoils to themselves.
As it often happens when a couple of players become so big that they become the ecosystem itself, none of the smaller logistics companies that used to survive on the spoils of ecommerce marketplaces, are in existence anymore. Essentially, very methodically, these two giants have spread their tentacles into every aspect of ecommerce enablement, including creating platforms for liquidating products not sold on their own platforms. Payments, logistics, pricing aggregation and reviews, no part of the ecosystem is able to survive on its own.
The turning point
The old school business communities which spawned the generation of modified “me-too” copycat models in India either through a diversification of existing business models or through investing in such companies always prioritized returns in the form of regular increments rather than invest in technology and the ecosystem. The result was obvious, and very painful for the end customers.
Startups that were so funded had only one way to go and they did. They copied, stole and pasted ideas some more just to keep the topline ticking, until one day in 2016 when the rug was stolen from beneath their feet. What is happening in the Indian ecosystem is a cleansing of sorts. Funding was easy, but on ridiculous terms, it no longer is. Only good ideas and strong execution with a clear path to profitability will get you to funding. The system is being cleaned of investors, ideas, entrepreneurs and businesses not worth their mettle.
A brief history
While Flipkart was literally spawned off the guts of Amazon in India, it has had a miraculous story of growth so far. When Sachin and Binny Bansals left Amazon’s development centre in India, they left with Amazon’s playbook. Their boss Amit Agarwal is the person who leads Amazon in India today. These are three very different people who along with Mukesh Bansal scripted the story of ecommerce in India. Amit started off as a developer, later a shadow for Bezos and finally leading ADC in India. A techie at heart, Amit has grown to be a phenomenal leader who understands India well. He is one of the few people in Indian ecosystem who has his ear on the ground.
Amazon’s global standards and ability to innovate brings a major difference to the ecosystem. All of Amazon’s developments at their ADCs in any country is then templatized for global usage. This means that any of the tech developments that happen as a function of localization in any country can be then brought into the Indian ecosystem and tested out on unsuspecting consumers. This ability to bring in best practices is what has kept Amazon so agile – a massive machine moving with the power and fluidity that only they can. In addition, they are also the only platform that actually understood all the maladies that I have mentioned and tried to solve for them.
Flirting with lawmakers
Bezos was bent on not getting kicked out of India same as he was from China. Unlike China though, India has never created a walled garden. Well, that is what India would have you believe. In reality, the new fangled bright eyed ecommerce entrepreneurs never really understood the importance of cozying up to the government the way the Ambanis and Adanis know how to.
Do you see Reliance retail or Future Group having to battle it out against the likes of Walmart or Target in India. We create walled gardens when we so please. So, when Bhavish Agarwal or Sachin Bansal are heard crying in public for government protection, they are just feeling left out. Amazon, though, has hardly made a mistake in the entire show. They have engaged the merchants who are happy and not very friendly to their friendly neighbourhood Flipkart. They have ensured that their global customer service standards have not been diluted and kept at the same standards.
Indian consumers, used to being treated miserably, are finally feeling like the kings they believe they are. Amazon has even tried being nice to ecosystem partners, knowing full well that they need not do anything as such.
Going back to its roots
Flipkart, on the other hand, used to be all this and more. At a time when no Indian company focused on technology, they did. When no one bothered, they built a world-class ecosystem. They were fresh, audacious and believed that they could really do good. They also really believed in the India story and was the only company that wasn’t really looking to service the international customers. A significant departure from the BPO generation of Indian companies, Flipkart was actually looking to create good technology for India!
It was only in 2016 that the pains of growing up caught up with them. The app only strategy went belly up and Flipkart handed their customers over to Amazon on a platter. It was the beginning of the downward slide for the Bansal brothers. Ever so often, I would hear whispers of delayed funding, merchants dues not being cleared for months and technology focus shifting. Moreover, the whispers of favored merchants and unscrupulous behavior grew even as Amazon was stealing a lead in growth.
With the Bansal brothers being relegated to the backrooms and Kalyan Krishnamurthy taking over the helm, it is a time for rebuilding at Flipkart. Unless they put their heads down, bring the focus back on technology and execution and rebuilding the lost ecosystem, the battle is lost and Amazon will steamroll them in a matter of a couple of years. Flipkart may have been beaten back, but they are not out. They still have a place in our hearts and some good backing globally. Despite Amazon’s superior performance, I seriously hope that Flipkart comes back to fight the good fight. Call me a romantic!
Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed on our blog, please drop us an email at [email protected] and let us know how we can help.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].
Much of what is written resonates. But the Bansals are not brothers. So the last para made me question the credibility of the entire article.
Yes we are aware that the Bansals are not actual brothers. If you know the Marwari business communities well, you would see the satire that the author was trying to make 😉
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