Much has been spoken about the impact created by Quick Commerce companies such as the 2.5 year old Zepto, the decade old Blinkit (formerly Grofers) owned by Zomato and Instamart by Swiggy. Many predict that this 3-way race will get racier once Reliance Jio joins the bandwagon shortly.
What happens to Amazon and Flipkart, the e-commerce giants who have been operating in India for a decade and 16 years respectively in the race to Q-Comm? Will Flipkart’s initiative “Minutes” be another experimental venture?
And why has Amazon been silent in this aspect? Q-Comm hasn’t worked anywhere in the world as much as it has in India – the collective revenues from Quick Commerce is currently pegged at USD 3 Bn (INR 24,000 Cr.).
Several top FMCG companies in India including Hindustan Unilever, Nestle, Parle, Marico, Dabur and several others have been reporting a small yet significant contribution to their sales arising from this channel.
Let’s see a bit of the background for e-commerce in India.
Flipkart started operations from Bangalore in 2007 while Amazon entered India in 2012. While Flipkart started as an online retailer owning inventory and selling directly to consumers, the company changed their way of operations by becoming a platform where “sellers” sold products to consumers directly.
When Amazon entered India, they too had internal SBUs which sold directly to consumers. This company was co-owned by NR Narayana Murthy’s family office invested Catamaran Ventures.
FDI regulations were tightened from 2014 onwards due to which both the companies and a slew of others had to move towards being a platform, instead of selling directly to consumers.
For FY 23-24, Amazon reported a revenue of INR 25,406 Cr while Flipkart reported a revenue of INR 17,907 Cr.
Amazon reported a loss of INR 3,469 Cr in its tenth year of operations while Flipkart reported a loss of INR 2,358 Cr in its 17th year of operations.
The B2B arm of Flipkart posted revenues of INR 70,542 Cr in FY 23-24 with an estimated loss of INR 4,194 Cr (including the ones mentioned above).
Whereas Amazon’s B2B venture posted a revenue of INR 3,567 Cr and a loss of INR 342 Cr.
During their operations in India, Amazon and Flipkart have lost over USd 4 Bn each, through salaries to staff, branding and marketing as well as absorbing the losses from margins due to deep discounts.
Flipkart was valued at USD 21 Bn in 2017 when Walmart acquired 77% of the company. Most recently, Flipkart owned PhonePe, the UPI based payment company was valued at USD 12 Bn. PhonePe has a near 50% market share in India.
With an estimated collective turnover of INR 100,000 Cr pa, both Amazon and Flipkart have not seen a rupee in profit for the last decade.
Same is with Q-commerce companies who have raised billions of dollars in investment.
This is a never ending sprint race. Will there ever be a consolidation in e-commerce or q-commerce – the jury is still to be out. However, will investors keep pumping dollars in these “sunrise business”? A vehement YES.
The ones who are making the best of the day are consumers with deep discounts on both platforms. The GIG economy is getting more formal than before, but they have a long way to go too. Let’s enjoy the party until it is on!
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