Flipkart wins festive season battle, says Redseer; Amazon counters claim

The online festive season sales saw e-commerce behemoths Flipkart and Amazon go head-to-head in one of the largest shopping extravaganzas. While billions were expected to be made, this year’s edition also threw up some surprising results.

E-commerce firms in India witnessed their highest ever performance over the five-day festive sales period, generating Rs 9,000 crore ($1.5 billion) in sales, data by research and advisory firm RedSeer Consulting shows.

This year’s sales edition registered a 40% year-on-year growth as compared to 2016, which generated $1.05 billion.

“Driven by their sharp advertising, robust offers, and flawless execution, e-tailers have managed to largely match their pre-sales expectations and deliver the biggest sale period ever for the e-tailing industry,” the research firm stated.

Going by data released by RedSeer, Flipkart dominated the market and has come out on top. The Softbank-funded e-commerce firm saw its gross merchandise value market share increase to 58% from 50% in 2016.

“This year pretty much has been the year of Flipkart. They have taken away the market share not just from their biggest competitor (Amazon) but also from the whole industry. Flipkart really dominated the five-day sales this year,” Mrigank Gutgutia, engagement manager at RedSeer told VCCircle.

The report said Amazon's share dipped to 26% during this season as compared to 32% recorded in 2016, while the combined market share of other e-tailers, including Paytm Mall, Shopclues, and Snapdeal, also saw their share drop from last year's 18% to 16%.

Flipkart had a clear lead in total sales in 2017, even higher than 2016, with its very high consumer brand recall playing a key role in driving the sales.

Flipkart said in a separate statement that its market share during the festive sale period was more than 70% of the e-commerce segment in India. It said that its sales during the period doubled compared with last year, though its marketing spend was little changed. The company also said that its share is 70% in the online smartphones market, 80% in fashion and 65% in large appliances.

However, Amazon has contested these claims. In response to an email query from VCCircle, Manish Tiwary, vice president of category management at Amazon India, said: “There are no credible, recognised research reports at present in India with robust methodology and significant sample size to provide objective market share reports. We have noticed poorly informed speculative reports with irrelevant sample sizes whose numbers do not add up to what we are seeing in the industry.”

Tiwary claims that Amazon continues to grow across key categories such as smartphones, large appliances, fashion and more. “The Great Indian Festival Sale marked our biggest shopping event where we saw tremendous growth across multiple categories, from smartphones (2.5 times growth) and large appliances (4 times growth) to kitchen and dining products (9 times growth), beauty (6 times growth), home category (growing five times) and fashion,” he said.

Amazon even acquired new customers during the sale and saw deeper penetration for existing customers. Tiwary claims that 85% of the firm’s new customers came from Tier 2 and 3 towns, as its network spread to areas such as Ladakh, Lakshadweep, the Andaman and Nicobar Islands, and Tripura.

Amazon’s 2017 slump

For any e-commerce venture to succeed in India, it must generate results in three categories, Gutgutia said.

Stage 1 is onboarding customers on the platform and this requires marketing and advertising strategies. “Last year, Amazon and Flipkart were pretty much similar in terms of brand recall. Flipkart had only a small lead over Amazon in terms of awareness of the sales. However, this year, Flipkart had a high gap and got ahead of Amazon in terms of building awareness,” Gutgutia said.

In Stage 2, once customers have signed up onto their platforms, e-commerce firms need to provide them with lucrative offers. Gutgutia says that Flipkart this year managed to execute this by providing a large number of offers on smartphones and other categories during the electronics day sale. This resulted in huge traffic flows to the site, which led to a very solid growth rate.

In Stage 3, the e-commerce firms have to ensure that customers shop multiple times during the sales period. “On that front, both are on the same page,” Gutgutia said.

All in all, Flipkart scored points over its rival in the first two stages—its marketing and advertising campaigns and the discounts and offers it gave across categories. "Driven by a highly successful marketing campaign, Flipkart was able to generate a significantly higher brand consumer recall of their sales event compared to Amazon. Coupled with attractive offers across categories, this saw Flipkart extend its lead over Amazon to a much wider margin in 2017 vs 2016,” Gutgutia explained.

Amazon’s strategy shift

Amazon’s lacklustre performance in the 2017 festive season sales indicates that the firm is perhaps pursuing a different strategy, said Gutgutia. To win in the smartphone category, which is dominated by Flipkart, Amazon will need to burn a lot of cash.

Gutgutia explained that in recent interviews, the American e-commerce firm indicated that it may focus on unit economics and its bottom line by 2019. So, it may want to aim its efforts in other categories like fashion and this shift is already evinced in its recent stake buy in Indian retail chain Shoppers Stop.

“They might be looking at other opportunities where they can become stronger. All said, they might not be cutting down their offers completely but want to be more targeted because you obviously choose your battle,” Gutgutia said.