Though the current lockdown has severely depleted the vigour of the e-commerce giants—Amazon and Flipkart in India, market experts feel that it is just a temporary phenomenon and may not last long. It is being estimated that post the lockdown, their business is likely to grow further in the country as people will be reluctant to go to brick-and-mortar retail outlets for fear of contracting the COVID-19 infection and would prefer to make online purchases.
Concerns about the lockdown in India were raised by Brian Olsavsky, the Chief Financial Officer (CFO) of Amazon, who said that the restrictions imposed due to the lockdown had impacted the company’s overall business. Experts, however, say that though Amazon’s growth would have been affected in India, it may not be long-term and it will bounce back soon. When contacted by THE WEEK, Amazon said that it is not offering any additional comments on global earning reports.
“Compared to the overall revenue Indian revenues may not be a major portion of the e-commerce giant. They are just trying to highlight that they are facing growth issues in India to lobby their concerns in front of US and Indian government authorities. With its huge network and tie up with local kirana stores, Amazon has a bright future in the country. The opposition from different local trade bodies against Amazon and Flipkart will continue but they will not be able to challenge them in the long run. Video streaming business such as Amazon Prime will see much more traction as people will not be going to movie halls for another 6-12 months due to the pandemic. Besides this, people will increasingly shop online in the long run as an after effect of the pandemic. “It is a bright future for them in India,” observed Kris Lakshmikanth, Founder and CEO of the executive search firm Head Hunters India Limited.
Concerning the opposition from local trade bodies in India, both Amazon and Flipkart has not made any comment. An email to Amazon seeking their comment on the issue went unanswered and the spokesperson for Flipkart has not commented on this.
Experts, however, feel that the future is online retail in India and the government should have a mechanism to streamline the supply chain to allow them to deliver non-essential items even in the red zones during the lockdown period. All these challenges are expected to be medium-term though.
“Even as the government is employing a graded policy to disengage with the lockdown process, it may not necessarily indicate that its back to normal for the e-commerce industry. There are multiple lobbies at play, government policies and regulatory overhang are only likely to squelch the e-commerce growth drivers in the medium-term. The supply chains are also in a moribund state. It will take considerable efforts to move the inertia that has set in before e-commerce firms are stocked-up and are ready to meet customer demand,” said Alok Shende of Ascentius Consulting.
Undoubtedly e-commerce companies in India had witnessed a surge in volume due to the sale in groceries, but non-essential items form the bulk of sales. They are a major source to their revenues in India and account for significant sales and these have been affected due to the pandemic.
“High margin non-essential goods, including electronic items key for work and study from home, have started hurting consumers and small businesses operating on the platform. Customers have shown considerable restraint during the lockdown. However, there is now a need to support their demands after the extension in the lockdown. Some relaxation in delivering non-essential goods through e-commerce sites will help meet customer demands and ease the impact on e-commerce supply chains in India,” explained Rajiv M. Ranjan Founder and Chairman, PaisaDukan.com.
Media reports say that now e-commerce players will be significantly eyeing green and orange zone and will try to deliver and make up for their losses by delivering non-essential items in these zones. That said they may pressurize the government to ease the restrictions to deliver non-essential even in red zones if the lockdown persists further.