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Good Morning Dear Reader,
For nearly a decade, the dominant narrative in India’s e-commerce space has been about the contest between Amazon and Flipkart. Two giants going head-to-head for control of how a billion Indians shop online. Even today, this conflict is played up in stories and reams of analysis about market share, category penetration, and numbers—especially during the sale season in October.
Who got more traffic? Who got more revenue? Who had the better offers?
In 2021, it’s now evident that none of this matters.
Companies go through this phase. Something new and exciting happens. A frontrunner steps up. Then several challengers. Most of them melt away, and we are left with two companies fighting for control with each other.
But at a certain point, something happens.
These companies stop fighting each other.
Well, actually, that’s not true. They do continue to fight for market share, category expansion, revenue, and are obsessed with each other, but the truth is that it stops mattering as much. The market becomes a virtual duopoly, and other threats emerge, which affect both these companies. And that’s when the mortal enemies suddenly find themselves fighting on the same side against something even bigger and more existential.
The truth is that the story of the battle between Amazon and Flipkart is less relevant and far less consequential today. It’s like Coke and Pepsi. Or Apple and Microsoft. Or Comcast and Verizon. Or iOS and Android. Or Roger and Rafa. Are these competitors? Sure. But are they mortal enemies? Not anymore.
Instead, what’s happening today is that both Amazon and Flipkart are fighting threats from all directions. And for the most part, they are doing it together. Over the last few weeks, some of this has escalated, and it’s now clear that things are getting more complicated for both of them.
Amazon and Flipkart are fighting seven wars.
It’s time to understand them and try to guess how it may all unfold.
Let’s dive in.
Photo by Антон Дмитриев on Unsplash
Before we get to what happened over the last few weeks, we should begin with the battle that Amazon and Flipkart have been fighting the longest.
It all begins with the Competition Commission of India (CCI).
1. Amazon and Flipkart vs CCI
Back in January 2020, a trade group called the Delhi Vyapar Mahasangh (DVM) filed a complaint with the CCI. The accusation was that both Amazon and Flipkart indulged in unfair and anti-competitive practices. In its submission, the DVM alleged that these companies were making exclusive agreements with some preferred sellers and offering deep discounts to the detriment of other sellers on these platforms. Then there were Amazon’s private label brands, also sold through these preferred sellers.
The CCI looked at this and decided that there was some merit in these claims, and started an official investigation to find out if Amazon and Flipkart had violated the Competition Act.
The investigation, which was basically a preliminary enquiry, never got off the ground.
That’s because Amazon and Flipkart swiftly went to court and filed a plea, asking for the CCI’s probe to be quashed. Both companies came up with some creative arguments about why the CCI shouldn’t investigate them. Eventually, the Karnataka High Court dismissed their appeals.
It’s never a good idea to tell India’s anti-competitive watchdog that it cannot investigate you, but it’s a far worse idea to take them to court and lose. Amazon and Flipkart’s tussle with the CCI is just beginning, but then they went one step further.
Both companies filed an appeal at the Supreme Court seeking a stay.
2. Amazon and Flipkart argue at the Supreme Court of India
It took over a year, but finally, three weeks back, the matter ended up in front of a bench at the Supreme Court.
Now I’m not a lawyer, but even after reading the live proceedings from the Supreme Court, it’s not entirely clear to me on what basis Amazon and Flipkart were appealing the judgement of the Karnataka High Court. It looks like the companies were arguing that the CCI needed to apply a few tests before it came to the conclusion that there was ‘prima-facie’ evidence, and it hadn’t applied those tests.
The Supreme Court listened to the arguments, and disagreed.
It even made clear what it expects from companies like Amazon and Flipkart.
And that’s how on 9 August, both Amazon and Flipkart lost the second war. The Supreme Court ruled in favour of the CCI, and both companies had to now participate and cooperate in the investigation.
3. Amazon and Cloudtail
After the Supreme Court announced its judgement, a few hours later, a statement was released by Amazon India and a company called Catamaran Ventures.
Catamaran Ventures is a venture capital fund set up by Infosys founder NR Narayana Murthy. In the statement, both companies said that they had mutually agreed to end their seven-year joint venture, Prione Business Services.
Now what is Prione Business Services, you may ask?
Cloudtail and Appario, another company formed as a result of a similar arrangement with Patni Group, account for over a third of Amazon’s sales.
Cloudtail was one of the alleged “preferred sellers” which the CCI was probing.
And now, just a few hours after the judgement, Amazon was announcing the end of the arrangement.
But while Amazon was facing some heat about its sellers, Flipkart was going through its own war.
4. Flipkart vs. Enforcement Directorate of India
Just a couple of days before the Supreme Court dismissed Flipkart’s and Amazon’s pleas, something strange happened.
The Enforcement Directorate (ED) issued a show cause notice of about Rs 10,600 crore ($1.35 billion) to Flipkart and its promoters for a violation of the Foreign Exchange Management Act (FEMA). The notice was issued to ten people, including Flipkart’s founders Sachin Bansal and Binny Bansal, among others.
Here’s the strange part.
The notice was issued for transactions made between 2009 and 2015. Since then, not only have seven years passed, but even Flipkart’s founders are no longer associated with the company.
In a statement, Flipkart said that it would fully cooperate with the investigation.
On the other hand, the Confederation of All India Traders (CAIT), a trade group, was both thrilled and disappointed with the development. Thrilled because Flipkart finally got hauled by the ED, but it also noted that it was “suspicious” that only Flipkart was targeted, and no similar missive was sent to Amazon.
Essentially, Flipkart probably believes that the show-cause notice was delayed and arbitrary.
The CAIT believes that it wasn’t arbitrary enough.
5. Amazon and Flipkart face payment troubles
This one is quite interesting, mostly because until now, both companies were locked in direct battles with multiple entities. This one is different, because it involves the Reserve Bank of India, which has been making some unusual moves of late.
First, the RBI has been making some changes to the way banks process recurring payments and subscriptions. Until now, customers just had to enter their card details, and their subscriptions would renew as long as it could.
Well, not anymore, said the RBI. It introduced a string of requirements to banks to process recurring transactions, most of which were impossible to comply with at short notice, making the process of collecting payment mandates harder.
Second, just a few days back, it went even further, and created new guidelines to prevent retailers from storing the card information of their customers. So, for every transaction, customers will have to enter their card details manually, essentially disabling one-click payments altogether.
I’ll let you take one guess who is affected the most by this.
Amazon Prime is the company’s most treasured product. It’s a subscription product, powered by recurring payments, which gives its customers priority delivery, access to sales, and much more.
And according to one person I spoke to, in India, Amazon’s Prime customers are just 5-7 million users, but account for over 50% of the company’s Gross Merchandise Value. This is a small, but extremely valuable base for the company.
Coincidentally, Amazon is also the company that created and patented the 1-click checkout flow—which would now be rendered inoperative in India.
No recurring payments, and no one-click ordering. Two of Amazon’s biggest assets rendered inoperative.
If I were Amazon, I’d be seething.
6. Amazon and Flipkart get substituted
The Department for Promotion of Industry and Internal Trade (DPIIT) is working on something quite interesting. It’s called the Open Network for Digital Commerce, or the ONDC.
The idea is that this will be a new digital infrastructure on which all e-commerce will be built, connecting sellers and buyers.
It’s a pretty strange proposition. We wrote about it earlier, and called it ‘India’s UPI solution for e-commerce’. In it, I wrote why this won’t work.
Others have weighed in with a similar point of view. Andy Mukherjee, a columnist for Bloomberg, called it “a solution looking for a problem”.
Essentially, while Amazon and Flipkart are fighting with multiple agencies of the state, from the judiciary, to the RBI and the ED, they are also fighting with parts of the state that are trying to substitute it.
7. Flipkart starts to worry about competitors
A few weeks back, Flipkart announced the launch of a zero-commission marketplace, through which the e-commerce platform will consolidate and bring smaller sellers across fashion and grocery online. It was a platform called Shopsy.
Strangely, this looked almost exactly like another product in India.
Here’s the description of it, from a story back in 2016, written by my colleague Jon Russell, back when he was writing for Techcrunch.
Flipkart is worried about Meesho.
Think about it from Flipkart’s perspective. Until now, it was competing with Amazon. However, it’s also important that it does not get disrupted by players like Meesho, which make the shopping experience much easier for customers through curation by resellers. Also, Meesho’s strengths are in the fashion category, a high-margin business line for Flipkart.
This isn’t the only product that Flipkart is focused on. It’s also building a B2B e-commerce product to take on Udaan, another of its adjacent competitors.
In the jungle, the lion never rests.
Certainly not Amazon and Flipkart.
Not when there are seven wars to be fought.
The Nutgraf is a paid weekly emailer that explains fundamental shifts in business, technology and finance that happened over the last seven days in India. In a way you’ll never forget.
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