Battle Of E-Commerce Giants: Who Will Emerge Winner This Festival Season?

On an average day, India’s e-commerce market ships about 15 lakh packages to consumers across the country. But with the festival fever setting in this October, this number could grow manifold.

Some market experts are talking about a three-fold surge in sales next month as festive buying peaks in India, some others talk of five-fold growth, while the sceptics believe an expected surge in orders next month may just about put the industry’s volumes back to last year’s levels – sales of India’s e-commerce market have been falling for first six months of this calendar year.

Whatever be the growth multiplier this October, one thing is clear: this festive season could be an important determinant of the e-commerce market’s pecking order since there is a close race between big daddies - Flipkart, Amazon and Snapdeal - to claim the number one spot.

Amazon will flag off its 'Tyohaar Bade Dilwala’ sale from Saturday, a day ahead of rivals Flipkart and Snapdeal. Flipkart’s ‘Big Billion Day’ sale begins on Gandhi Jayanti while Snapdeal is launching ‘Unbox Diwali Sale’ the same day with up to 70 per cent discounts on a large range of products. This year, unlike in the past, e-commerce companies have relied on sellers on their respective platforms to offer discounts – instead of discounting themselves. The recent government norms which frown upon e-commerce companies offering huge discounts may be the reason – in addition to the growing realisation that insane discounting is pushing these firms further away from profitability. A Snapdeal spokesperson said sellers are offering discounts based on their own volume estimates this Diwali on Snapdeal.

So who will emerge a winner this Diwali? This story quotes a Bank of America Merrill Lynch Report to say that Flipkart is the market leader with over 43 per cent market share and will retain its market share till 2019. The marked change will be for Amazon, which is expected to reach 37 per cent share in 2019 against just 21 per cent in 2015. The report predicts that Snapdeal's share will fall to just 9 per cent from 14 per cent in 2015. Industry experts have already noted Amazon’s rapid strides on gaining customers. Sales during Dussehra-Diwali usually account for up to a third of the year’s total sales of e-tailers.

Last week, several news reports suggested that US giant Wal-Mart could be in talks to invest up to a billion dollars in Flipkart – if this happens, it would surely provide Flipkart with more fire to counter Amazon’s growing threat in the Indian market.

Anyhow, while many believe in a manifold increase in orders this festive season, this story quotes RedSeer consulting saying that sales this October will not be much higher than those seen during the 2015 festive season. And annualised GMV (gross merchandise value or the total value of goods sold) for e-commerce companies fell 5 to 10 per cent in the second quarter of 2016 so from there, it would be 8 to 10 per cent growth.

Last Diwali, the e-tailers had more to cheer about though. RedSeer’s own analysis shows that there was a four times jump in GMV last year, daily transactions escalated three times vis-à-vis on a non-sale day and there was a spike of 50 per cent in the average order value (AOV) as online shoppers purchased more premium products.

One of the largest logistics firms dealing with e-commerce deliveries says there is no reason to despair this year either, and a three-fold volume growth is expected in October. K Satyanarayana, co-founder of Ecom Express, says the surge in deliveries this October could mean almost 45 lakh packages are shipped daily. “We have plans to increase our capacities by threefold to meet this expected demand surge. We have hired 8,000 temporary staff, keeping in mind Diwali sales, the Google festival slated for December and the Republic Day order surge in January. Our investments this festival season will be between Rs 25 and Rs 30 crore”.

All eyes are trained on Amazon, the company which has stolen a march over rivals through the year in terms of orders. But Manish Tiwary, vice-president category management at Amazon India, did not speak of the quantum of expected volume surge in October. Neither did he offer any comments on whether his company would establish itself as the clear number one e-commerce company in India. He merely said Amazon has 200 per cent more sellers, thrice the selection and 1.5 times more fulfilment capacity this festival season. “We expect millions of new customers to shop on the sale and experience Amazon.in for the first time and a healthy percentage of the demand coming in from the tier II and tier III cities. We also expect to see an increase in the number of customers shopping on the Amazon mobile App.”

A Snapdeal spokesperson said her company was expecting a five times surge in orders and was focused this festive season on improving the experience customers have while shopping in Snapdeal on any regular day. “Huge order surge during festive buying generally means site becomes slow, deliveries slow down etc. We have stress-tested our systems for 10 times more orders than normal, warehouses will work round the clock through temporary staff we have hired - 10,000 more people for expected order surge - and they will mainly be deployed in logistics, delivery and packaging. To further improve deliveries, we have already booked 20,000 tonnes of cargo air space for Diwali shipments.”

Unit economics – how much money any e-tailer will gain or lose on each piece shipped during the sale period - would perhaps be the best way to analyse the Indian market’s pecking order post-Diwali. A huge order surge does not necessarily translate into financial gains, as each Indian e-commerce player knows well.