Amazon struggles to expand as it faces ‘unfavorable regulatory environment’ in India – TechCrunch

According to a report by investment firm Sanford C. Bernstein, Amazon is lagging its arch-rival Flipkart in several key metrics in India and is trying to make inroads in smaller Indian cities and towns.

The US e-commerce giant’s 2021 gross merchandise value in the country, where it has deployed more than $6.5 billion, will be $18-20 billion, trailing Flipkart’s $23 billion, analysts said in a report to clients on Tuesday. by TechCrunch. The company’s recent spending on growth in India has also made profitability “elusive”, the report said.

India is a key overseas market for Amazon, where it competes with Mukesh Ambani’s Reliance Retail, Walmart-owned Flipkart and social commerce startups Meesho-backed and Tiger Global, which backs DealShare. : Amazon has so far offered a “weaker offering in ‘new’ commerce” in the country, the report said.

One of the world’s last great growth markets is at stake. E-commerce spending in India is expected to double to $130 billion by 2025.

Amazon did not immediately respond to a request for comment.

“Amazon has struggled to grow volumes in higher margin categories such as fashion and BPC, while the inability to operate a 1P model has limited access to private labels against competition, further pressuring margins. Amazon’s management attrition has also increased recently, potentially signaling difficulties in achieving the desired scale,” the report adds.

Amazon, like Walmart’s Flipkart, operates a marketplace business in India due to local regulatory requirements. It faces a wide range of other regulatory backlash in the country. Marketplaces cannot have a controlling stake in the sellers on their platform. Amazon and Flipkart have reduced their stakes in their biggest selling companies. Amazon had controlling stakes in Cloudtail and Appario, but has reduced that to 24%.

A single seller cannot have more than a 25% share in a foreign-owned online marketplace. No e-commerce marketplace platform can obligate a seller/brand to sell exclusively on the platform. “It has also limited deep discounting,” the report added. Additionally, the new guideline proposed by India’s central bank, if implemented, will affect Amazon’s buy-now-pay-later proposition, the report said.

Image credits: Sanford C. Bernstein

Other highlights from the report:

  • Amazon is less competitive in the grocery and beauty and personal care categories.
  • Amazon’s India Prime membership offering is about the same as in the US in terms of entertainment affordability, but the size of its logistics network pales in comparison (13m sq ft vs 375m sq ft), which limits the SKUs that are available for half days. shipment.
  • Amazon misses out on engagement metrics and download share. During the festival season last year, Flipkart was the leader, capturing a 62% share, while Amazon had a 27% share.
  • Image credits: Sanford C. Bernstein

  • Image credits: Sanford C. Bernstein

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