Amazon follows Walmart’s leader and reaches new customers in India

Amazon‘s

AMZN 0.12%

dominance in e-commerce is unparalleled, but the traditional retailer Walmart WMT -0.36%

has been gaining ground for years. The manuscript was flipped in India last week as Amazon followed in the footsteps of a Walmart-owned domestic rival to enter the burgeoning social trade area by making a small acquisition.

Amazon’s delayed entry into space underscores the competitive intensity of the Indian market, with companies constantly looking for newer ways of selling. For Amazon, which faces increased competition not only from Walmart but also from local giants Reliance Industries 500325 -2.31%

and Tata Group, a little more aggression to enter newer areas of the world’s second largest internet market would not be unjustified.

On Friday, Amazon announced the acquisition of a small social-commerce startup, Glowroad, for an undisclosed amount, marking its first venture into space in India, after Walmart-owned Flipkart launched the social-commerce platform Shopsy in July last year. Softbank and Meta Platforms-backed Meesho, worth about $ 5 billion, has been the leader in the social commerce market for seven years now. Amazon said the Glowroad deal was a way to explore new ways to “digitize India and delight customers, micro-entrepreneurs and sellers.”

Social commerce platforms connect unbranded manufacturers, mostly in fashion, lifestyle, home decor and small electronics, to consumers in smaller cities in India through a retailer who curates products, displays and sells to their community, often through the Meta-owned WhatsApp message app. The end buyers in this segment have typically only recently gained access to the Internet and may lack the confidence or knowledge to make direct purchases online.

The acquisition will help Amazon penetrate deeper into the country and bring millions of new consumers to online retail. Social commerce is seen as an intermediate step before the consumer matures enough to directly buy goods online. On its website, the startup says it has built a network of over 6 million dealers, earning an average of 35,000 Indian rupees ($ 458) a month. In social commerce, the average ticket size of products is low, but so is the cost of customer acquisition, as retailers work in their own communities.

An Amazon warehousing facility on the outskirts of Mumbai. Amazon’s acquisition of a small social-commerce startup marks its first venture into space in India.


Photo:

FRANCIS MASCARENHAS / REUTERS

Amazon and Flipkart take the social commerce model seriously as they strive to remain relevant in India, says Prashanth Prakash, partner at Accel, which is an investor in Glowroad. “For Amazon, it’s a new way to serve customers beyond cities at levels 1-2. These Indian consumers are different and need a different approach … and Amazon wants to be one of the options for them,” he says. .

India’s online retail has been busy with established retailers, e-commerce companies and social media platforms all vying for a share of the market that is expected to see 291 million shoppers spend $ 85.5 billion on online retail by 2025, according to Forrester Research. Between 2019 and 2021, Meesho went from 209,000 monthly users to 17.8 million and aims to reach 100 million users by the end of this year. Walmart was first on the field, but with Amazon’s investment, the fight is fully committed.

The boundary between Amazon and Walmart is becoming more and more blurred as the two companies seek to maintain their share of the estimated $ 5 trillion retail market while cutting the other’s share, often by borrowing the other’s ideas. Photos: Amazon / Walmart

Write to Mega Mandavia at megha.mandavia@wsj.com

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Leave a Reply

Your email address will not be published. Required fields are marked *