Battle Royale: Amazon and Flipkart slug it out

2020 has been a pivotal year for many sectors; E-commerce, OTT and gaming have witnessed previously unimaginable growth trajectories, while mobility and even food aggregators saw severe headwinds.

As consumer behavior went through a paradigm shift, we de-code how Amazon and Flipkart battled it out last year.

Amazon started the year with a substantial lead on penetration — however, Flipkart has closed in by December (see chart below). Both players grew reach, as more consumers shifted online during the lockdowns, however Flipkart’s 20% growth left Amazon’s 5% growth (although on a much larger base) looking low.

Interestingly, E-commerce penetration increased across the board.

"Notably, the highest growth was seen among older customers (45+, and 35–45, to a lesser extent)".

This cohort could unlock further growth for the sector, as it still remains the most under penetrated segment (38% Reach for 45 Y.O. vs. overall penetration of 46% for Flipkart, 61% for 45 Y.O. vs. overall pen. of 65% for Amazon)offering room to grow,spending as much time and money as any other age-group, and potentially more spending power.

Notably, this is the cohort where the gap between Amazon and Flipkart is the highest!

Barring the initial phase of delivery embargos, and the hike in usage during the festive period, the year saw a more or less consistent usage pattern.

Even though Flipkart’s usage metrics are significantly better, Amazon’s larger base, in effect allows for similar absolute numbers of active users on both platforms.

Estimates of Active Internet Users Calculated for Reach are Based on Nielsen IAMAI 2019 Report

To calculate the number of users with Amazon/Flipkart app installed, the penetration of these apps has been taken from the KalaGato panel, and projected to the smartphone universe of 16+ adults. These numbers are then multiplied by Average Monthly Usage % from our panel to arrive at absolute numbers of Monthly Users. Monthly Transacting customers include customers who transact both from the app and web, and are arrived at by multiplying MAC % from our panel with the overall smartphone universe weighted with E-commerce penetration.

Ergo, key action points for both players is cut out — while Flipkart would need to work on greater reach and desirability, Amazon needs to move its inactive base into transacting customers.

Flipkart has much reason to cheer when it comes to transacting/paying customers — not only did they start 2020 on a stronger footing than Amazon, the platform has clearly come out on top through the pandemic as well.

“Amazon grew transacting reach by 1.5 times, while Flipkart doubled”!

"While growth was omnipresent, it was even sharper among females, tier 3 towns and older customers".

Higher Open Rates and Time spent for Flipkart could indicate one of two things: more engaged users or a higher ‘dwell’ time — this was evident during the festive period.

A potential reason for higher engagement or dwell times (depending on how you look at it) is ‘deal hunting’ and ‘deal availability’. Does the Flipkart audience consist of more deal hunters as compared to Amazon? If this is the case are they as loyal?

In fact, if you look at Average Order Values and Average Order Frequencies (calculated per transacting customer) — you will find that Amazon users often order worth lower values but order more frequently. Indicating a greater level of platform loyalty.

Flipkart also leads in average transaction value per customer at 12% higher order values on average than Amazon, and a whopping ~30% lead during the Festive period (Oct 2020).

"On average, an Amazon customer orders ~30% more frequently than a Flipkart customer"

This could have to do with a holistic loyalty programme that bundles several offerings (especially around content), with the promise of faster delivery, discounts and now even food. Amazon Pay is part of a larger startegy of providing users with “everything”, in a bid to enmesh the user within the ‘Amazon eco-system’.

Both Flipkart and Amazon have distinct advantages — Amazon with its penetration and platform loyalty (when it comes to order frequencies) and Flipkart with its user engagement and order values.The entry of Reliance Industries — by way of AJIO and JIOMart (along with JIO telecom) and the Tata Group — by way of TataCliq and their investment into 1MG and BigBasket is a further complication. Backed by Cash Rich Conglomerates — these companies will be able to offer discounts / deals that make profitability and retention more competitive than it already was.

As always, do share your thoughts / feedback and get in touch for data!

Thanks for your time,

- Aman

[email protected]

www.kalagato.co