Big Billion Days: Flipkart targeting new customers to stay ahead of Amazon

Bengaluru: After winning last year’s make-or-break Diwali sale battle, online retailer Flipkart Ltd plans to add a large number of new customers for the first time in more than a year and extend its slender lead over arch-rival Amazon.com Inc. in this week’s Big Billion Days sale.

Flipkart is betting on smartphones, televisions and refrigerators to drive sales to existing customers and on fashion, accessories and home and furniture products to lure new users, a majority of whom will be women, according to its estimates.

Flipkart’s Big Billion Days is slated for 20-24 September this year.

Amazon India (Amazon Seller Services Pvt. Ltd), however, has beefed up its product assortment and supply chain capacity in the two key product categories of smartphones and large appliances, which account for a majority of sales in the festive period. The company has added a large number of smartphone exclusives and launched several new brands, such as BPL, in televisions. It has also built an independent logistics and warehousing network for large appliances, which it didn’t have last year, indicating it will push Flipkart close in sales of smartphones and televisions.

Analysts expect sales in this year’s festive period to be much higher compared with last year. Gross sales or gross merchandise value (GMV) across online retailers may reach $1.7 billion in this festive sales period, an increase of 62% from the year-ago period, according to RedSeer Consulting, a market research and consulting firm.

“Last year’s Big Billion Days was a lot about tapping into your existing user base, a lot about reactivating lapsed customers,” said Smrithi Ravichandran, senior director, Flipkart. “But this year’s Big Billion Days will be about a mixture of growing our repeat customers and also about growing new users in triple digit numbers. Because of the telecom players making inroads into the Tier 2-3 cities and towns, over the past few months we have seen a huge increase in the number of Tier 2-3 shoppers.”

Flipkart’s focus on attracting new users is a shift in its strategy of the past 15 months. Since Kalyan Krishnamurthy, now CEO of Flipkart, returned to the company in June 2016, he has pushed the online retailer to increase its focus on serving existing users. That’s because while Flipkart has a registered user base of more than 120 million people, the number of frequent shoppers is a small fraction of that.

The shift in the strategy is the manifestation of how things have turned around for Flipkart since last year’s Big Billion Days in October. Then, it was the underdog. It had lost market share to Amazon for a year, seen sales growth stagnate and had its valuation marked down by many of its own investors. But it outsold Amazon in the festive period in 2016 and since then, has maintained its own against the American online retailer. The company’s confidence has received a big boost from its fund raise of nearly $3 billion from Tencent, Microsoft, eBay and SoftBank Group Corp. in two tranches earlier this year.

Amazon, too, has adopted slightly different tactics for this year’s sale. Unlike last year, when it splashed on advertising in order to try and eclipse Flipkart’s Big Billion Days sales event, the company has reduced its marketing spending this year. A person familiar with the company’s strategy said it will instead pour cash into discounting. Amazon has focused on creating a large infrastructure to deliver products quickly to customers in particular for phones and televisions.

In an interview on 8 September, Amazon India chief Amit Agarwal said the company had significantly expanded its capabilities since last year’s Diwali season sale.

“We are pretty confident that this will be our biggest shopping season ever...in our four-year history (in India). At a high level if I compare this year’s Great Indian Festival with last year, we’ve added more than 80 million products and grown selection two times. It’s like adding one whole Amazon in the last one year for our customers,” said Agarwal, who was elevated to the rank of senior vice-president at Amazon.com earlier this year.

The Diwali sale may determine the course of the e-commerce market for the next few quarters.

“All our preparations have been toward ensuring that we give customers the best experience and broaden our lead (over Amazon). We’ve seen that every festive season gives a clear leadership for the next year and it sets the tone and changes the pace of customer (acquisition and retention),” Ravichandran said.