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Amazon is lagging behind its main rival Flipkart in India on several key metrics and is struggling to penetrate smaller Indian cities and towns, according to a scathing report from investment firm Sanford C. Bernstein.

The U.S. e-commerce giant’s 2021 gross trade value in the country, where it has staked more than $6.5 billion, was between $18 billion and $20 billion, lagging behind Flipkart’s $23 billion, analysts said on Tuesday. in a report to customers obtained by londonbusinessblog.com.

India is a key overseas market for Amazon, where it competes with Mukesh Ambani’s Reliance Retail, which launched groceries this week on WhatsApp, Walmart-owned Flipkart, and SoftBank-backed Meesho and Tiger Global-backed DealShare. Amazon has so far offered “a weaker proposal in ‘new’ trade” in the country, the report added.

At stake is one of the world’s last major growth markets. E-commerce spending in India, the world’s second largest internet market, is expected to double in size to more than $130 billion by 2025. Amazon has tried to increase its presence in India through stakes in local businesses and also aggressively partnered with convenience stores.

The company tried to acquire Future Retail, India’s second largest retail chain, but was outsmarted by Ambani’s company. (Amazon accused estranged Indian partner and Reliance of fraud in newspaper advertisements.)

Amazon’s recent spending on growth in India has also made the local division’s profit-making prospects “elusive,” the Bernstein report added.

The e-commerce group did not immediately respond to a request for comment on Tuesday evening.

“Amazon has struggled to scale volumes in higher-margin categories such as fashion and BPC (beauty and personal care), while the inability to use a 1P model (stock-driven) has reduced private label availability versus competition. limited, which puts further pressure on margins. . Amazon’s management churn has also increased recently, possibly indicating difficulties in achieving the desired scale,” said Bernstein, whose reports are highly influential and widely quoted.

Amazon, like Walmart’s Flipkart, operates a marketplace business in India due to local legal requirements. It faces a wide variety of other regulatory pushbacks in the South Asian market. Marketplaces cannot have a controlling interest in sellers on their platform. Amazon and Flipkart have reduced their stakes in their largest sellers. Amazon had a majority stake in Cloudtail and Appario, but has reduced it to 24%.

A single seller cannot have more than 25% on a foreign-owned online marketplace. No ecommerce marketplace platform can oblige a seller/brand to sell exclusively on the platform. “It has also curbed major discounts,” the report adds. In addition, a new directive proposed by India’s central bank, if enforced, will affect Amazon’s buy now, pay later offering, the report added.

Image Credits: Sanford C. Bernstein

Other takeaways from the report:

  • Amazon is less competitive in the grocery, beauty and personal care categories.
  • Amazon’s India Prime membership offering is much the same as in the US in terms of entertainment availability, but the size of its logistics network pales in comparison (13 m sq. ft. vs. 375 m sq. ft.) reducing SKUs available for half a day are limited delivery.
  • Amazon is lagging behind in engagement stats and download share. Flipkart was the leader during the festival season last year, capturing a 62% share, while Amazon had a 27% share.
    Image Credits: Sanford C. Bernstein
  • Image Credits: Sanford C. Bernstein

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