Supply chain duels, like wars of conflict, are now increasingly global. Walmart and Amazon are entrenched in a long fight to win over the e-commerce market in India.
It has been about 16 months from when Walmart acquired Flipkart to make inroads into India. Now, Walmart in India is making a pivot.
As I have argued earlier, based on Flipkart’s operational performance, this acquisition has not been a big boon, that Walmart expected it to be. In light of my observations of Flipkart’s warehouse operations compared to Amazon’s, this outcome is not a surprising one for me. Acquiring Flipkart gave Walmart access to e-commerce customers that were unavailable to it. However, the Indian retail market has been a tough market to crack.
Now, after repeated tries, Walmart is making a pivot to focus on business to business (B2B) e-commerce, similar to how Costco operates in the United States. This is because Indian retail market is highly fragmented.
India’s massive retail market is largely untouched by global retailers and tough to crack because it is dominated by millions of tiny shops, tea stalls and vegetable carts. Rather than battle this powerful lobby, Amazon, Flipkart and other e-commerce leaders in India have been trying to join forces with the local merchants by hiring them for deliveries and helping supply their stores.
Will this work out? I think it is a better idea to serve small stores than going directly to consumers. E-commerce customers in India who buy low quantities of products with thin margins, that are hard to ship profitably. It is good to imagine a small store in India, like a rich suburban household in the United States, in terms of steady consumption and continued buying. The big problem is, of course, Amazon (and Reliance) have pitched into this battle with deep pockets.
An additional challenge that Walmart faces is that Amazon prime has made serious inroads into reaching these “small stores” as an important brand. Remember, these small stores are also consumers, and in a “content-loving” population in India, Amazon Prime has several TV shows and movies to offer. (Amazon Prime costs Rs. 999 annually — which is around USD 15!). Once a customer, these “mom-and-pop” stores are increasingly integrated into Amazon India’s ecosystem.
Despite massive growth in digital orders, an estimated 50%+ orders are still Cash-on-delivery, having these mom-and-pop stores as digital customers allow Amazon to employ them as touch-points for the end-item consumer in the physical supply chain.
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