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Business trends

Consumer goods companies in India take on Amazon and Flipkart

Tata and ITC launch e-commerce platforms despite challenges ahead

ITC is challenging Amazon and Flipkart for a share of the growing Indian e-commerce market, which is expected to reach $100bn in sales by 2024. (Website screenshot)

NEW DELHI -- India's e-commerce landscape is fast-changing as the COVID-19 pandemic drives consumers online, with Tata Group the latest to launch its digital platform, Tata CLiQ.

These companies are hoping to challenge Amazon.com and Walmart-owned Flipkart, leading e-commerce platforms in India, for a share of the market which is expected to reach $100 billion in sales by 2024. Both Amazon and Flipkart dominate the market with a wide range of products and nationwide delivery infrastructure.

But if any company can pose a threat to the two market giants, one contender will be Tata. All Tata products, including refrigerators from group company Voltas and the whole collection of fashion items from its Westside brand, as well as items from well-known international brands, are being sold through CLiQ.

The conglomerate also recently launched an online grocery store called StarQuik and an online electronics store called Croma.

Tata is expected to merge these sites with CLiQ in the near future. Simultaneously, Tata is seeking to flank its e-commerce platforms with its own new payment system across India digitally and in stores.

Samsung Electronics' Indian unit expects 10% of its business in the country to come from its own online store by the end of 2021. (Website screenshot)

While the trend toward forming an online presence has been clear for some time, the pandemic has accelerated companies' plans. Sales in India's e-commerce market reached $30 billion in 2019 and are expected to more than triple to over $100 billion by 2024, according to a joint research report by management consultancy Alvarez & Marshal and the Confederation of Indian Industries.

The research found that online sales for television sets grew 24% in 2019 from a year ago, washing machines 12% and refrigerators 5%.

Tata is not the only company to try to vie for a slice of that pie. Samsung Electronics' local unit said recently that it sees 10% of its India business coming from its own online store by the end of 2021. ITC, a major player in the market for fast-moving consumer products, also started selling its top-end goods via its own e-commerce marketplace.

Zurich-based multinational electrical equipment company ABB, too, recently said it wanted a direct line to consumers in India. After launching its e-commerce platform this year, CP Vyas, India unit president of electrification, told Nikkei Asia the company "wanted to reach our customers directly, connect them to channel partners and remove any third party in between."

He added: "Our platform offers complete price transparency to customers, allowing them to get the best deal on every product."

For now, analysts said the new entrants may find it tough to loosen the grip of Amazon and Flipkart on consumers. Forrester Research said that Flipkart controlled 31.9% of the market and Amazon 31.2% as of 2018.

"Starting a stand-alone consumer-facing e-commerce marketplace is easier said than done," Rajat Wahi, partner at Deloitte who has worked with global e-commerce companies, told Nikkei.

Flipkart and Amazon have been neck-and-neck in their race for market share in the Indian e-commerce market.   © Reuters

One major obstacle is "the high cost of getting a customer to visit and shop on the platform since most consumers do not gravitate toward a marketplace for a particular brand but prefer a general one like Amazon," he said.

The other cost is in shipment. "Particularly in India, unless you have scale, shipment costs can often exceed the cost of the product ordered. Without overcoming these financial obstacles, most platforms will be [making] wasted efforts," Wahi said.

To cover those costs, the new players in the market have had to hike up prices. ITC sells its popular men's deodorant Bukhara and ladies' dresses at prices that are 5% to 10% higher on its itcstore.in website than Amazon. This raises questions about the sustainability of their e-commerce businesses.

Other retailers said the best strategy was to find a way to coexist with Amazon and Flipkart by offering product differentiation. For example, Japanese sneaker brand Asics is one of those companies that are adopting a hybrid strategy with sales on both Amazon and its own website.

"We collaborate with other online channels [such as Amazon and Flipkart] equally as they help us reach out to a wider audience. These channels have helped deliver Asics to all corners of the country and we will always respect that," said Asics India Managing Director Rajat Khurana.

"Our long-term focus is on building both channels -- our website and other partners -- with clear differentiation in the product offering," he said.

He added that the Asics website can also give a more personal shopping experience. "We are constantly improving customer experience. This includes creating a virtual foot ID (identification) experience for customers so that they can understand their foot structure better and make an informed decision," Khurana said.

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