Amazon is struggling in India unlike Reliance, Meesho says wealth management firm Bernstein

Amazon marked a spectacular entry into India in 2013 and not just because Jeff Bezos sat atop a colourful truck or it invested $7 billion into the market. India is one of the biggest emerging ecommerce markets globally, estimated to reach $130 billion by 2025.

Almost ten years later, its success is being questioned by a wealth management firm, Bernstein, in its latest report.

Amazon is now the second largest player behind Flipkart with a gross merchandise value of $18-20 billion and has over 170 million products. But it’s yet to tur profitable in a market where the average order value is below $10 (approx. ₹800).

“Besides growth-related investments, profitability has also been impacted by a higher mix of low margin product categories (e.g., smartphones with sub 5% net margins). Amazon has struggled to scale volumes in higher margin categories such as fashion and beauty and personal care,” said the Bernstein report.

Fashion has seen the highest growth in the last few years, and so has grocery. But the latter is led by quick commerce players like Dunzo, Zepto and Blinkit. Amazon and Flipkart are market leaders in mobiles and consumer electronics. But the share of this segment in the ecommerce market is declining.

Indian regulations give Reliance an edge over Amazon

In spite of having 700,000 sellers on its platform, Amazon is yet to gain ground in a very important category in India — tier 2 and tier 3 markets. As per the report, these markets account for around 50% of all e-commerce sales, and they’re growing.

“Reliance leads in India with a strong 1P business with over 15,000 store retail footprints. Flipkart is the frontrunner in the apparel category and social ecommerce firm Meesho is winning in tier 2/3 cities where Amazon struggles to perform,” it said.

1P business is where retailers have an online presence like Reliance with a wide brick and mortar footprint. Amazon however is a 3P player who works with sellers. The regulations in India are skewed towards the former, and tougher for MNCs.

“Regulations don’t allow for an inventory-led 1P model for a foreign entity like Amazon. The company has made investments into local retailers like Shoppers Stop (fashion), More (grocery), and a rumoured stake in Ecom Express (logistics) but integration has been limited as the regulations don’t allow for full control,” the report said.

At the same time, its key competitor Reliance scaled up its ecommerce operations to around 19% of core retail sales, thanks to its 15,000 stores and ability to manage an inventory-led model.

“Amazon’s management attrition has also increased recently, potentially signaling difficulties achieving desired scale,” the report said. Amazon’s worldwide consumer CEO Dave Clark left the company after 23 years in 2022.

Source:https://www.businessinsider.in/business/ecommerce/news/amazon-is-struggling-in-india-unlike-reliance-meesho-says-wealth-management-firm-bernstein/articleshow/93950044.cms

Leave a Reply

Your email address will not be published. Required fields are marked *