Amazon, the e-commerce giant that revolutionized online shopping globally, is facing significant challenges in India. Once seen as an unstoppable force, the company’s strategy and execution in this critical market are being questioned, particularly in the burgeoning quick-commerce sector.
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About two years ago, a venture capital firm evaluating an investment in a quick-commerce startup in India hesitated, concerned that Amazon might dominate the sector. However, after consulting with Amazon’s leadership, the firm walked away reassured that the e-commerce giant had no plans to enter the quick-commerce space in India. This decision is now being viewed as a critical misstep.
An Overlooked Market
India, with its massive population, is a crucial market for global tech giants. While the overall e-commerce market in India grew by 11% to 12% last year, the quick-commerce sector expanded by over 125%. This explosive growth, driven by the convenience of instant delivery, has positioned companies like Blinkit, Zepto, and Swiggy’s Instamart to generate combined annual sales of around $4.5 billion. This figure represents a quarter of it India’s $18 billion in sales, according to JM Financial, highlighting the significant market share quick-commerce players have captured.
Amazon’s Missed Opportunities
It absence in the quick-commerce space is striking, especially given that this market segment is reshaping consumer behavior in India’s top cities. Categories like groceries, electronics, and household items, which are essential traffic drivers for traditional e-commerce platforms, are increasingly being dominated by quick-commerce firms. These companies are not only capturing sales but are also leveraging their growing market share to negotiate better deals with brands, further strengthening their position.
Despite this, It has remained on the sidelines, even mocking quick-commerce in its advertisements. This stance appears increasingly out of touch with the evolving market dynamics. In contrast, It main competitor in India, Flipkart, has launched its quick-commerce service, Flipkart Minutes, in a bid to win over urban customers who are increasingly favoring faster delivery options.
Strategic Shifts and Market Challenges
It struggles in India go beyond just missing out on quick commerce. The company has been losing market share for over three years, a trend exacerbated by the recent resignation of It India’s head, Manish Tiwary. Analysts suggest that It has failed to capitalize on opportunities in tier 2 markets and has been slow to innovate in critical categories like apparel.
Meesho, a social commerce platform, has rapidly gained market share in smaller Indian cities, surpassing It in mobile app usage. Flipkart also leads in daily active users, with more than 50 million compared to It 40 million, according to Bank of America analysts. The e-commerce growth in India is increasingly driven by these smaller cities, where platforms like Meesho are thriving.
A Shift in Priorities
Insiders suggest that Amazon, under the leadership of Andy Jassy, has shifted its focus in India towards its cloud business, It Web Services (AWS). Last year, It announced a $15 billion investment in India by 2030, with $12.7 billion earmarked for AWS. Meanwhile, Walmart and Flipkart continue to pour over $1 billion annually into their e-commerce operations in the country.
Amazon has also faced regulatory challenges, including stringent restrictions imposed by the Indian government in 2019, which forced the company to overhaul its business model. Additionally, It lost a high-profile battle to acquire Future Group, India’s second-largest retail chain, to Reliance, further complicating its position in the market.
The Road Ahead for Amazon in India
While Amazon continues to experiment with new services, including It Pay and Amazon Fresh, the company’s ability to bounce back in India is uncertain. Analysts are skeptical, pointing out that Amazon has already invested heavily in a supply-chain system that may not be easily adaptable to the rapidly changing consumer landscape.
As Amazon navigates these challenges, it faces increasing competition from nimble local players who have out-executed the e-commerce giant. Whether Amazon can regain its footing in India remains to be seen, but for now, the company’s dominance in this critical market appears to be slipping.
