Amazon may cut prices in market share battle with Flipkart

Bengaluru: After struggling to close the gap with Flipkart Ltd, Amazon India plans to cut prices and increase spending over the next few quarters to increase its market share in the company’s most important international market, three people familiar with the matter said.

Amazon is simultaneously competing with its domestic rival Walmart Inc., the world’s largest retailer, to buy a majority stake in Flipkart.

Since the end of 2016, Flipkart, which was then on the verge of losing the top spot to Amazon, has consistently maintained a slender lead over the US-based company despite spending less. Flipkart’s ability to maintain its lead in smartphone sales, which comprise roughly half of all online retail in India, has been central to the company’s turnaround.

Now, Amazon plans to drop prices of smartphones to increase its market share, the people cited above said.

Noor Patel, director of smartphones category management at Amazon, said that sellers decide the pricing of products on the company’s platform.

“We continue to seek out opportunities to make smartphones more affordable for our customers. Our exchange and EMI schemes have gained momentum with customers. We are working closely with brands to enable them to reach out to customers across India,” Patel said through a spokesperson.

He said that Amazon has significantly expanded its exclusive smartphone selection to more than 180 products. “Smartphones continue to be one of the biggest categories and Amazon.in has become the destination of choice for customers as well as brands,” Patel added.

Still, Flipkart’s ascendance under new chief executive Kalyan Krishnamurthy has been clear over the past 18 months. Flipkart has consistently outsold Amazon in key sale events such as the Diwali sale.

Flipkart’s pursuit by Walmart and Amazon at a valuation of more than $20 billion is an acknowledgement by Amazon that it has failed so far to become the dominant online retail firm in the country.

Apart from lagging Flipkart in smartphones sales by a small margin, Amazon has also struggled to catch up with the Bengaluru-based company in sales of fashion products. Flipkart’s ownership of fashion retailers Myntra and Jabong has helped the company build stronger relationships with fashion brands and hoard supplies of the best-selling products.

Despite ploughing money to expand its fashion business, Amazon has so far failed to break Flipkart’s monopoly.

“There’s a lot of pressure internally at Amazon. They think that they became complacent in 2016 when they could’ve beaten Flipkart. But they lost the opportunity and Flipkart has been consistently better than them in GMV (gross merchandise value),” one of the people cited above said. If Walmart buys Flipkart, it will only strengthen the perception that Amazon slipped up and lost the chance to win the India market for good in 2016, this person said.

Mint reported in September that Amazon India has two large competing initiatives called Get Big and Get Fit. The first comprises expansion and second is about keep keeping costs under control. For much of 2017, Amazon focused on cutting marketing, logistics and others costs.

The three people cited above said that Amazon plans to prioritize sales growth and market share wins over cutting losses for the next few quarters.

In June 2016, Amazon CEO Jeff Bezos said the company will spend $3 billion more to expand its operations in India. Bezos had already committed $2 billion toward India in 2014.