Friends, whenever we talk about India’s E-Commerce. Then Amazon and Flipkart are in the top positions. But when we compare that which one is best, Amazon or Flipkart? Here it creates confusion. Because some are Amazon users and some are Flipkart users. But the truth is that. That Amazon is well known for its dominating nature. Even Amazon’s history also says that.
Whenever it enters in any country. It totally finished the competition. But have you ever thought? Why does this not happen in India? Why Amazon is still unable to beat Flipkart? And in today’s blog post. We are going to know about Flipkart’s business strategy. So, let’s start the Case study.
Friends, Flipkart and Amazon. This Indian E-Commerce business started in the year 2014. When Flipkart was the king of the Indian E-Commerce Market. In fact, Flipkart holds a 40% share of this industry in the year 2014. And Amazon’s share was only 12%. But after 2016, the stats changing. And Amazon revenue starts increasing rapidly. Even in the year 2018. Amazon’s market share became 31.2% from 11%.
It means, In 2014 when Flipkart’s market share was 3 times more than Amazon. It became approx. equal to Flipkart’s share in 2018. And the shocking news is that. This has not happened only in India. Whenever it enters another country. Destroyed other’s company dominance as well. Here the question arises. Which business strategy does Amazon follow? Through which it shows rapid growth.
In fact, this business strategy. Is hidden in special membership service. Which is called Amazon Prime Membership. You will be surprised to know. That this Amazon’s premium membership. Neither launched for providing special services nor for prime videos. But there is a strong psychological reason behind it. Which is known as The Sunk Cost Fallacy in Economics. American Economist Richard Thaler described this psychological effect in 1979.
According to this theory, human nature. Even they know the situation very well. Takes a harmful step that harms him. Because he has invested his time and money for that task. Let’s understand it through an example. Let’s assume you go to a theatre. But after some time, you come to know that. That the movie is boring. Even in this situation.
You didn’t leave the show ever you’re getting bored. You know very well. We are just wasting our time watching this movie. But you spent money on watching that movie. So, there will be a high chance that watch the full movie. Like this, whenever we visit any restaurant. After receiving our order, we come to know that. That we ordered more food by mistake. But at that time, we know very well.
That our money will not get refunded by overeating. Moreover, because of overeating. There is a chance of getting a stomach ache. Even in this situation. Most of us eat all the food. Because we spent money for the food. And this human nature is known as The Sunk Cost Fallacy. Which from the perspective of the business itself is a billion-dollar idea. And Amazon has launched its Amazon Prime Video keeping this principle in mind.
Actually, there are many people like this in India. Those who take the subscription of Amazon Prime just to watch series like Mirzapur, Familyman. When because of this membership. Various tempting offers. Like Free Delivery, Fast Delivery Unlimited Reward Points. Get special deals and discounts. So those people do shopping from Amazon even when they are not needed. Other than this. Whenever they need to buy something.
So they will always buy that thing from Amazon instead of Flipkart. Because he has spent his money on prime membership. And the reports suggest that. as compared to the non-prime member. Prime members shop three times with Amazon. That is, we can say in a way. That Amazon uses its Prime membership as bait. Because he knows this. That if once someone took a membership of Amazon.
Then that person according to his nature. Will also start shopping from Amazon. And if seen, this business strategy of Amazon. It proved to be very beneficial for them. Because in the year 2016. Ever since Amazon launched Prime Video in India. Since then his revenue in Indian eCommerce marketing has increased a lot. Also, Amazon has executed this strategy beautifully. That too is an important reason for their success.
Actually, Amazon is on its streaming service. From live stand up comedy. They have done all the work till Alexa and Firestick are brought to people’s homes. So that the number of prime members can increase as much as possible. And friends after all these strategies in the year 2018. His sales had also crossed $7.5 billion. But this is the biggest twist in this story. Even after doing all this, Amazon. Amazon has been seen lagging behind Flipkart in the last few years.
Even in the last 2 Diwali sales. Flipkart beats Amazon by a huge margin. Actually during the Diwali shopping season of 2020. In the combined sales of Amazon and Flipkart. Flipkart’s share stood at 66%. While in Amazon’s part. Only 34% could be found in these sales. And so on in the Diwali season of 2021. The market share of Flipkart was only 60% and that of Amazon was 32%.
That is, both friends are in Diwali sales. Flipkart beat Amazon by almost double the margin. And that in itself is a really shocking figure. So friends, in such a situation the question arises. After all, even after adopting such a powerful strategy. How did Amazon lag behind Flipkart during Diwali sales? So, friends, there are 3 reasons behind this happening. Reason no-1 Friends, there is no doubt that Amazon’s Prime membership strategy.
There has been a lot of work in tier-one cities. But here the problem happened. Contribution of more than 50% in Diwali sales since last 2 years. of those small towns and cities. Those who are counted in Tier 2, 3 and above category. And this has been a very positive point for Flipkart. Because Flipkart’s hold in these small cities is tremendous. Reason no-2 Friends, Amazon Jahan charges Rs 189 per month from the customer for its membership.
Flipkart in the same place. Gives its Flipkart and membership to the students for free. Through which he while shopping on Flipkart. Free and fast delivery and exclusive DS and discounts. And take advantage of offers like Early Access. Actually behind giving free membership. Flipkart has a great strategy. Actually teenagers of all the houses. Are the biggest buyers of electronics.
And most of the finished electronics products have margins. So so are all the companies. Want to increase your electronics sales. And friends, this is the reason. More than 75% of the people involved in the membership of Flipkart are like this. Which programs with any such loyalty. Such as credit cards, and rewards programs and are not part of the Prime membership. Apart from this, Amazon Prime members. Where instead of non-prime members, they do triple shopping.
Same Flipkart membership customer. Shop 5 to 7 times as compared to nonplus members. Reason no-3 Friends, Flipkart also has a lot of advantages behind beating Amazon. That is because of his Myntra. Has been the leader of the fashion segment since its inception. You will be surprised to know. Flipkart holds more than 70% market share of the online fashion segment. Whereas Amazon has been struggling with this since the beginning.
In this way after knowing all these facts. It shows. This business war between Flipkart and Amazon is very close. Where both the companies are putting their full emphasis to compete with each other. And according to the reports. Also offline malls like Reliance and Dmart. Now preparing to enter this competition. And so in the future. Difficulties are going to increase for companies like Amazon and Flipkart.
Because of the arrival of Reliance and Dmart. This competition is going to get even tougher. And friends if you want to know. How is Reliance going to beat Amazon now? You can read it here on our Blog. just Search this in the search bar above. Thank you very much for giving your valuable time and Reading the whole case study.