Major Research Project Shiva
Major Research Project Shiva
Major Research Project Shiva
On
Logistics system of “amazon india.com and flipkart.com”
Submitted to
Devi Ahilya University, Indore
1. Introduction.................................................................................................1
Background 1
Motivation..........................................................................................3
Purpose 4
Thesis outline 4
2. Methodology...............................................................................................5
Research methods 5
Research approach. 6
Limitations.........................................................................................6
3. Literature Overview....................................................................................7
E-commerce 7
E-commerce business categories..........................................................................................9
Impact of e-commerce....................................................................12
Social 12
Supply chain management...................................................13
Factors affecting e-commerce..............................................................................................15
Government policies 16
Logistics 19
Overview.................................................................................19
Logistics evolution 22
Handling and order processing............................................................................................27
Transportation........................................................................29
Outsourcing............................................................................29
6. Analyses....................................................................................................47
SWOT Analysis................................................................................47
PORTER Analysis...........................................................................53
7. Bibliography ………………………………………………………………….55
1. Introduction
This section gives an overview about e-commerce background and its development
over the years
Background
In 1980, individual computers were mostly used at research universities. It was used for
sending e-mails, sharing research documents etc. over networks like BITNET. For
home personal users, CompuServe was popular for providing tools like e-mails and
chat rooms. It added a service called Electronic Mail which users can purchase from
service provider called 110 online. It was not very successful initially but it laid
foundation for the e-commerce we know today. In 1990, a researcher named Tim
Berners-Lee at the European Organization for Nuclear Research proposed a
hypertext-based web of information in which a user could navigate using a simple
interface called a browser. He called it the "Worldwide Web".In 1991, ban on
commercial businesses operating over the internet was lifted by the National Science.
It opened the way for Web-based e-commerce.
1
In 1993, the National Centre for Supercomputing Applications (NCSA) introduced the first web
browser named Mosaic. Similarly, Netscape 1.0 was released in 1994 which included an
important security protocol called Secure Socket Layer (SSL). It encrypted messages on both
the sending and receiving side of an online transaction. It ensured encryption of personal
information like names, addresses and credit card numbers when they passed over the
Internet
First third party services for processing online credit card sales started appearing in year
1994. In 1995, Verisign started developing digital IDs, or certificates, that verified the
identity of online businesses. It focused mainly to certifying proper encryption for a Web
site's e-commerce servers.
The history of e-commerce is incomplete without Amazon and eBay which transformed e-
commerce in the mid-1990. In July 1995, Jeff Bezos packed the first book ever sold on
Amazon.com from his Seattle garage. Within its first 30 days of business, the self-proclaimed
"Earth's largest bookstore" sold books to online shoppers in all 50 U.S. states and 45
countries.
Amazon began gripping into a powerful new e-commerce market. Books were cheap to ship
and easy to order directly from publishers. Publishers had already created vast digital
archives of their titles on CD-ROM, something that could be uploaded to a Web site.
Amazon.com set the standard for a customer-oriented e- commerce Web site. Users could
search available titles by keyword, author or subject. They could browse books by category
and even get personalized recommendations. They could also purchase books quickly and
securely with the patented "one-click" checkout system. But the most popular Amazon.com
feature has always been the reader review option. On Amazon, any registered member can
write and publish a book review. And other users can rank each review, creating a hierarchy
of top Amazon reviewers. Amazon's steep discounts on many books has contributed to the
site's popularity.
In developed nations such as US & Germany, e-commerce arrived early and matured soon. In
developing nation such as India, it is still in early stage and facing a lot of problem specially
related to logistics such as high delivery cost, time in transit, package tracking etc.
E-commerce is growing rapidly around the globe. Convenience of shopping at home with
competitive prices and quick delivery has made a lot of people switch from traditional
shopping methods to e-commerce. With growing acceptability of online payments, revenue is
growing five to seven time every year in India. Shopping via smartphones is proving to be
game changer. It is estimated that around 60% of the total e-commerce sales are generated by
mobile devices and tablets and it is increasing every year rapidly. The e-commerce industry
in India is likely to be worth USD 38 billion by 2016 end, a 67% jump over the USD 23
billion revenues for 2015, as per industry body Assocham.
In this thesis, I have chosen Amazon and Flipkart in India, two of the biggest e- commerce
companies in India today as our research topic.
(https://www.researchgate.net), (https://www.worldwidejournals.com)
Motivation
India is home to 1.2 billion population and is a developing nation. With GDP growth around
7.5%, it is one of fastest growing economy in the world. The middle class in India is around
35 million which is bigger than some country total population. They have purchasing power
and that make it one of the biggest market for e-commerce industry. Amazon, a US based e-
commerce company and home grown Flipkart are fighting to get larger share of market. With
some other market players such as Snapdeal, it is one of most competitive market in the
world. The population under 30 makes around 65% population and Internet penetration is still
very low in India, so the scope for growth is immense.
The two companies Amazon and Flipkart operate in India with different strategies. Logistics
which plays a key role in e-commerce is also handled differently in both companies. This is
the reason for choosing Amazon and Flipkart and to explore their functioning.
Purpose
The purpose of this thesis is to explain Amazon and Flipkart (India) working,
business model, logistics structure etc and to perform SWOT & PORTER analysis
based on it.
Thesis Outline
Research Methods
The two main type of research methods are quantitative and qualitative.
Internet
Data Analysis
Conclusion
(Source - http://www.snapsurveys.com/qualitative-quantitative-research)
Research approach
Limitations
The e-commerce as a whole is a big topic, we have narrow our focus to business
strategies implemented by Amazon and Flipkart in India. The factors such as people
will be avoided in this study. Such a focus has been chosen because factors of people
is more involved with human resources management.
3. Literature Overview
Following an overview about the relevant literature for this work will be given.
E-commerce
The Internet started to become popular among the general public in 1994, it took
four years to develop security system such as HTTP and DSL, which increased
access and Internet speed. In 2000 a large number of companies in US and Europe
started their services in the World Wide Web. During this time, the general public
began to learn about it as process of buying and selling goods and services over
Internet using electronic payment methods using secure connections. The history of
ecommerce is incomplete without Amazon and EBay, which were among the first
Internet companies with facility of electronic transactions. By the end of 2001,
Business-to-Business (B2B) model form of ecommerce had around $700 billion in
transactions. E-commerce has emerged as one of the biggest Internet technology in
the last decade. The comfort of trading or facilitating services using Internet has
revolutionized the way shopping is done. The global growth chart is shown in Figure
2.
India’s e-commerce market was worth about $3.8 Billion in the year 2009, it went up
to $12.6 Billion in 2013. In the year 2013, the e-retail segment was worth US$ 2.3
Billion. About 70 per cent of India’s e-commerce market is travel- related. India has
close to 10 Million online shoppers, and is growing at an estimated 30 per cent
CAGR vis-à-vis a global growth rate of 8 to 10per cent. The main reasons for its
growth are busy lifestyles, urban traffic congestion, lack of time for online shopping,
lower prices compared to brick and mortar retail driven by disintermediation and
reduced inventory and real estate costs, increased usage of online classified sites,
with more consumer buying and selling second-hand goods, evolution of the online
marketplace model with websites like Jabong.com, Flipkart, Snap deal, and In -
beam respectively.
According to Report by Avendus Capital, entitled “India Goes Digital”, the Indian e-
tailing industry is estimated to grow to Rs. 53,000 Crores ($11.8 Billion) in the sales,
a feat it has managed to achieve before its own target (2015).
A report recently published by the Boston Consulting Group also stated that online
retail in India could be an $84Billion industry by the year 2016 more than 10
times its worth of the year 2010. The growth in Indian market is shown in Figure 3.
(https://www.worldwidejournals.com)
Technologies
Transaction security
Security is a crucial part of any online transaction over the Internet. Customer
will lose confidence in e-business if its security is compromised and can damage
company image. For safe e-payments these are the important requirements:
Security Tools
4. Secure socket layer (SSL) – It is the most widely used protocol across the
industry. It fulfills the following security requirements:
Authentication
Encryption
Integrity
Non-reputability
In Internet browser where user type the website name “http” represents:
"http://" - With SSL
"http:/" – Without SSL
5. Secure hypertext transfer protocol – It act as an extension to HTTP with
additional features such as digital signature over the Internet. It acts as
additional feature to secure HTTP to provide security to end-users.
6. Secure electronic transaction – It is a secure protocol developed jointly by
MasterCard and Visa. It is the considered the best security protocol. It has
following elements:
Social
The e-commerce has affected the society and economy in a large way. The success
of e-commerce has led to emergence to many other services such as online banking,
education, advertisement etc. Its rapidly growing business around the globe reflects
how big its impact on the society and economy. It leads to lower cost, new
employment opportunities and also improves the economic efficiency. Internet
shopping has provided value to customers as now they can find and buy the best
product in the market; compare prices in the global market to get the best value for
their money. E-commerce companies also provide the best level of service compared
to retail shopping, which earned them customer trust. In beginning people were
unsure about using their credit and debit card details online for payment on e-
commerce websites but with introduction of new IT services which are safe and
secure and new laws related to e-commerce, customers confidently started using e-
commerce websites.
1. The importance of time has changed in today world. Customers today need
convenience and fast service. It has changed the way people do shopping.
2. Distance has become irrelevant because of e-commerce. Now customers from
rural part of the country are not required to go big city to purchase its good.
3. Easy return policy has changed the customer perspective. Customer who
previously faced problem in offline retail stores to get back return or change
their products is attracted to e-commerce because of it.
4. Highly competitive pricing has helped in adding more and more customer
under e-commerce cloud.
Supply chain management
The companies have been long troubled on how to deliver supply chain technologies
benefits to customers. However, the emergence of e-commerce has provided them a
practical and effective way of delivering the benefits of the new supply chain. E-
commerce has the power to incorporate department of inter- company and intra-
company, which include physical, financial and information flow. The physical flow
improved the inventory management for companies. The information flow has
improved information processing and financial flow has allowed companies to have
more efficient payment gateways.
The other ways in which e-commerce affects the supply chain management is:
1.Cost Factor
Companies with the use of e-commerce can reduce costs; streamline business process
and provide better customer service. Exchange of documents such as freight
invoices, shipping instruction etc. is done electronically, which resulted in higher
accuracy and efficiency. The only investment is a personal computer and an Internet
connection.
The other ways in which e-commerce affects the supply chain management is:
2. Cost Factor
Companies with the use of e-commerce can reduce costs; streamline business process
and provide better customer service. Exchange of documents such as freight
invoices, shipping instruction etc. is done electronically, which resulted in higher
accuracy and efficiency. The only investment is a personal computer and an Internet
connection.
2. Distribution system
With millions of goods movement and huge information transfer between suppliers
and customer, E-commerce provides flexibility in managing it. Customer can directly
manage information throughout the supply chain thus eliminating contact between
customers and distribution centers.
3. Shipment tracking
Customer can establish an account on e-commerce websites and obtain real time
information about individual shipments. They can also view freight charges, claim in
case of failed delivery and many other functions. The application uses encryption
technology to keep customer information safe.
4. Shipping notice
The shipping items details are electronically transmitted ahead of the shipment. It
helps companies to record the details of every parcel being shipped.
The standard billing labels, shipping labels and carrier information are automatically
produced thus reduced the need for manual intervention. With less paper work
involved it makes shipping process more efficient.
The shipping information can be access to anyone in the company, from any
location. The shipment is tracked accurately and proof of delivery is quickly
confirmed. A customer can analyze shipping rates and negotiate for better deal thus
helping in improving customer satisfaction.
1. IT and Security
One of major factor affecting e-commerce all around the world is security of online
data. Ensuring safe payment online is key to acceptance of e-commerce. The lack
of transparency in electronic payment and virus, spyware increases fear among the
customers. The huge customer information with companies is always at risk and
susceptible to stolen by hacker, co-operate spies and even employees.
2. Customer attitude
Globally, many customers still prefer to shop outside because they cannot touch
and feel the product. Some customers are also impatient to wait to receive the
product while some are not sure of the product quality. Some customers are still
hesitant to put their banking, credit card detail online.
3. Technology
The technology changes very rapidly and its need to updated frequently to remain
competitive. Companies continuously need to find new investors to invest in the
upgradation of new technology plus hire new IT profession to keep system
performing at an optimal level.
4. Internet
Internet penetration is still very low in developing nations. In India with a population
1.2 billion people has estimated only 15.3% Internet users by 2013. E-commerce
business depends on speed and bandwidth for communications. Broadband
connection is still limited to urban and suburban area. Internet is out reach for rural
population.
5. Infrastructure
6. Others
Government Policies
The e-commerce is governed by IT act 2000 in India. India was the 12 nations to
adopt cyber laws. Some of the objectives of the act are:
Types of FDI
3. Vertical FDI takes place when a firm through FDI moves upstream or
downstream in different value chains i.e., when firms perform value-adding
activities stage by stage in a vertical fashion in a host country.
(http://ptlb.in/ecommerce/?p=440).
(https://en.wikipedia.org/wiki/Foreign_direct_investmet)
Currently, there are two ways in which FDI can entry in e-commerce in India.
1. Automatic Route
2. Government Route
A single brand retail entity operating through brick and mortar store is
permitted to undertake retail trading through e-commerce.
21
An Indian manufacturer is permitted to sell its own single brand products
through E-Commerce retail. Indian manufacturer would be the investee
company, which is the owner of the Indian brand and which
manufactures in India, in terms of value, at least 70% of its products in
house, and sources, at most 30% from Indian manufacturers.
4. Payments for such sale may be facilitated by the E-Commerce entity to the
seller in conformity with the guidelines of the Reserve Bank of India.
6. An E-Commerce entity cannot permit more than 25% of the sale affected
through its marketplace, from one vendor or its group companies.
(http://ptlb.in/ecommerce/?p=440)
Logistics
Overview
Logistics is happening around the globe 24 hours a day’ through a year. In some
areas of business it involve the complexity or span the geography typical of logistics.
Logistics deals with delivery of products and services where they are needed
whenever they are desired.
In case of physical goods, logistics involves integration of warehousing, packing,
transportation and information flow.
1. Procurement Logistics
2. Distribution Logistics
3. After-sales Logistics
4. Disposal Logistics
5. Reverse Logistics
6. Green Logistics
7. Global Logistics
8. Domestics Logistics
9. Concierge Service
6. RAM Logistics – It deals with the heavy business and military logistics. It is
highly complicated because it deals with weapon systems and other military
hardware.
Demand forecasting
Purchasing
Warehousing Logistics
Material Handling
Industrial Packaging
Order Processing
Transportation
Customer Service
Fragmentation 1960:
This phase was known as fragmentation because each part was disintegrated and
done separately.
Evolving Integration:
During this time the concepts of Logistical management was evolving.
Total integration
In the present day scenario, Logistics has evolved to become a part of
management.
Importance of logistics
OBJECTIVES
1. Rapid response
3. Minimum Inventory
The objective is to reduce inventory to the lowest level in level with customer
satisfaction to achieve the lowest overall total logistics cost. Concepts like
zero inventories have become increasingly applied as managers seek to
reduce inventory deployment. Zero inventories concept looks economical but
inventories have it own benefits. In large-scale manufacturing and
procurement, it provides better return on investment. The objective is to
reduce and manage inventory to the lowest possible level while
simultaneously achieving desired operating objectives.
4. Movement consolidation
5. Quality improvement
6. Life-Cycle support
The last objective is life-cycle support. Products are mostly sold without
some guarantee that the product will perform as advertised over a specified
period. Product recall under some conditions is part of reverse logistics. With
high quality standards, product failure under guarantee can be reduced. It also
includes responsibility for hazardous consequences in case of product failure
under expiry date. Laws prohibiting disposal and encouraging recycling of
beverage containers and packaging materials are taken under consideration in
return logistics. The commitment to life cycle support in case of firms
marketing consumer durables or industrial equipment is very demanding in
case of operational requirement and complex. It also has the largest costs of
logistical operations.
(Chaudhary)
Logistics in e-commerce
Handling system include many equipment such as multiple handler, cell racks,
cantilever racks etc. order processing involves labeling, weighting, packing, lading
bills, picking order for transportation etc. Picking is done manually and automated.
In manual, use of conveyor belt is used for good movement and picking by man.
Robots or dispensers are used in automated case. Sorting is done manually or
through automated sorters.
In warehouses, the items are stored in proper arrangement. It is done with the help of
storage racks.
Automatic NC (Numeric Control) picking robots are used to pick items which has to
be shipped. The process is monitored by warehouse staff that moniter and control it
via computers. Picking and packing process is quick due use of machines and less
human involvement reduces error in picking.
Figure 8. Automated Picking Robots
(Source-https://www.linkedin.com/pulse/robot-aisle-automated-storage-
retrieval-system-fernando)
Shipping items are moved in packing facility with the help of conveyor belt.
Items are then packed in boxes based on its size then they separated based on
delivery locations.
(Source - https://www.andweighing.com)
Packed shipping items are weighed using Digital Weighing Machine. Items shipping
cost is directly related to shipping weight.
Transportation
Outsourcing
The decision outsource to a Third Party Logistics (3PL) company can be challenging
yet rewarding to the organization. Supply chain functions have grown increasingly
complex with globalization, technology, and competition advancing at a rapid pace.
Analysis of cost factors, performance gaps, financial impact, and suitability for
outsourcing yields is required for superior outsourcing strategies and transition
plans.
(http://theprogressgroup.com/white-papers/logistics-outsourcing-is-it-right-for-your-
business/)
4. Case one – Amazon India
Introduction
1. U.S.
2. Canada
3. UK
4. Germany
5. France
6. Italy
7. Spain
8. Japan
9. China
10 India
In 2013, Amazon launched its site in India, amazon.in. It started with electronic
goods and expanded into fashion apparel, beauty, home essentials, and healthcare
categories by the end of 2013. Since India does not allow foreign direct investment
(FDI) in direct online retail, Amazon started by launching Junglee.com. It is a price
comparing website completely own by Amazon. On Amazon’s marketplace in India,
users can buy books, movies and TV shows from independent sellers directly on
Amazon.
Amazon is known for its wafer-thin margins, but still reported sales growth of over
27% to $61 billion in the year 2013 in India. It push back much of the money
it makes into the company. By 2015 end, Amazon started operation in 50 cities. It
projected to grow rapidly in the next five years. The Figure 11 shows the sales
forecast. (http://www.livemint.com)
Figure 11. Sales forecast in India
(Source - http://recode.net)
Competition
1. Flipkart
2. Snapdeal
3. EBay
The market share of each company for the year 2015 is shown below
Amazon started its online marketplace in India from 2013. The company started with
software development centers, which has employed many software developers and
technologists’ through India. Amazon was not interested in India as a potential
market due to the following reasons.
1. The major reason that prevented Amazon’s entry into was due to political
reasons. India liberalized its markets to foreign investment way back in 1991;
the retailing sector was still closed to foreign retailers. FDI is not allowed
inE- commerce. In last decade, Government of India introduced reforms that
allowed foreign retailers like Amazon to partner with local partners to
sell their products. Inventory based model on which company operates in US
is prohibited in India.
2. Secondly, the online retail market in India was too small in the early 2000.
Economically, Indian market was not an interesting prospect
3. Another important reason that discouraged Amazon entering India was that
despite the country’s massive population, Internet penetration was very low
in the country. India only had ~50 million active Internet users in the year
2012 which means that the potential customers in the country was too small.
4. The concept of online retailing was not well established in India since
people were more comfortable with traditional shopping methods. Amazon
has to not only enter new market but also have to create awareness about
online shopping. This additional cost would have affected the return on
investment for the company.
Services
Selling on Amazon
All type of business can sell product and services on Amazon. It is one of the fastest
ways to begin selling online
Fulfillment on Amazon
Advertisement on Amazon
Business model
These are of two types
Ordering
A customer after opening the website, select one or more items for purchase. This
items directly goes to the electronic basket provided by websites. It provided
information about pricing, delivery time and payment mode such as credit card,
online banking etc. Sometimes based on the customer history option of cash on
delivery, discounts are roled out to customers.
Amazon has integrated inventory online order with order planning, inventory
planning and fulfillment system. In case the item is not in stock or under processing,
its delivery time will be confirmed to the customer before the order is accepted. Its
inventory management system closely monitor the inventory movement right from
the source of supply, warehouses, distribution center and finally to customer. It uses
computer software and algorithm to forecast sales and inventory. For items out of
stock, replenishment instruction will be issued as soon the item is off the shelves.
For Amazon, in order to ensure that all orders can be processed and shipped in time
for Diwali and Holi (two biggest festival in India), when sales volume is at its peak,
the company employs a variety of data collection tools to make sure purchased goods
move through from warehouses onto trucks as quickly as possible.
Order execution
Once the order is accepted for execution, order details are passed on to the inventory
manager or directly to the third party for filling and packaging. The order details
incorporate item detail, quantity and packaging. The warehouse manager will then
instruct for delivery of item to the customer. All this process is done
electronically. The delivery detail will be immediately conveyed to the customer via
email and SMS along with the invoice.
Shipping
Based upon the size of the consignment, transport is organized by the logistics arm of
Amazon or through third party logistics partner in some case. Decision software
decides the choice of carrier, mode of transport, route, scheduling of goods according
to client location, public holidays and other variables.
It is a recent buzz according to which Amazon is busy building or has probably built
drones to increase its business. Sooner or later, drones will be acting as local delivery
boy and will be delivering goods at customers’ footsteps and giving online retailer
ship just an- other level. So, customers’ do not have to worry too much anymore
whether the person delivering goods to your address is confused at how to find your
address. Who knows? Maybe Amazon someday makes it possible. A customer
wishing to get delivered a set of books merely has to locate his house on Google
maps, and paying machine comes with the stuff you ordered.
(http://www.techulator.com)
Tracking
Customer always wants to know the current status of item during transit. To help in
locating the consignment, a bar coding system with satellite communication is used.
Amazon provides this code to the customers on its websites to help them locate
their order. It is a value added service for customer convenience.
Payments
Amazon provide customers many payment option such as:
1. Credit card
2. Debit card
3. Online banking
4. Cash on delivery
5. Coupons
6. Paypal
Some options such as cash on delivery sometimes depends upon client location,
credit history, item value and volume of order. The system then generates online
invoices, payment report, payment reminder etc.
Return policy
In a case where customer does not like the product, find performance below
expectation or product being damaged during transit. For items fulfilled by Amazon,
will be eligible for a free replacement. A detail timeframe and guideline for return is
given at Amazon website.
Return process
A separate system in place handles the reverse material flow. The return process is
shown in Figure 16.
Amazon started delivering goods using third party logistics. It was cautious move
because they were entering into a completely new market. With increase market
share and revenue, it started its own logistics branch to handle its logistics
operations.
1. Cost saving.
2. Reducing the amount of damage good delivered to customers.
3. Better customer service.
4. To build its reputation as safe and reliable company.
5. Optimization of supply chain.
6. Ability to collect data and analyze it for further improvement.
7. Delivery of goods on time and to right person.
5. Case Two - Flipkart India
Introduction
(https://www.quora.com)
Business model
Flipkart started on inventory based model and currently operates on both inventory
and market place model Since 2013, Flipkart has been slowly shifting to a
marketplace model, where it connects customers to thousands of third-party sellers
rather than sell products only through WS Retail due to the new FDI rules in India.
“FDI is not be allowed in inventory-based models, where the company owns the
goods that are being sold through its platform”
WS Retail – is the largest seller on its platform, and accounts close to 40% of the
total sales of the company. As part of a complex arrangement, WS Retail sells goods
from Flipkart India Pvt. Ltd, the B2B (business-to-business) arm of the main group
holding company, and sells the same goods to customers on Flipkart’s site. WS
Retail also owned and ran Flipkart’s key logistics business called e-kart that
delivered products to customers.
(http://2015greetingcards.com)
t Flipkart, and Amazon are burning more than $100 million of cash every
month in discounting products. As compare to Amazon, Flipkart has the
higher burn rate. To fund the discounts, both companies are raising money
via investment by foreign and local investors. Flipkart has raised around $ 2.3
billion so far. Amazon India backed by its parent company has pledged to
receive investment around $ 2 billion in coming years.
The reason behind the complex structure is FDI is barred in direct online retail in
India.
The ownership of FPL Singapore is shared between Tiger Global, Accel Partners,
Naspers and the Bansals. Tiger Global, the US-based firm holds approximately 30%
in the parent company with two seats on the board. Flipkart also owns Myntra, a
clothing e-commerce company that was acquired by Flipkart in May 2013 for $330
million.
Company Structure
Customer Support
Product and Technology
Team
Table 2 – Flipkart company structure
(Source – http://cmuscm.blogspot.co.at)
It is the core team of the company which manages the company website and the ERP
system. Website is a pillar for any e-commerce business. Flipkart has a modern
system, which uses open source software. The team manages the process starting
from listing of products to optimization of search.
This team is responsible for activities related to sales, pricing, discount strategy, and
vendor management.
Operations Team
This team is responsible for the supply chain. It include procurement, warehouse
management and customer support. The customer support is done both online as well
as offline.
Flipkart put a lot of emphasis on customer service. It guarantees a 24/7 service to all
its customers. It has a full time customer support team with two main
responsibilities:
Flipkart when started its on inventory based model. It invested huge capital
on warehouses and logistics. Since 2013, it started using mixture of both
models. It is mainly due to the FDI norms in India. Amazon on the other hand
has always operated on marketplace model. In April 2016, Government of
India allowed 100% FDI in marketplace based e-commerce. The operating
condition after the announcement now favours heavy toward marketplace
model. All the leading e-commerce companies are working under
marketplace model.
2. Pricing Strategy
It is very often seen in the Indian market that both Amazon and Flipkart are
offering the same price or very close price for some products. Both these
companies are marketplaces and sellers may not necessarily agree to price
cuts the companies want.
Amazon has a team which has prime task only to execute execute strategic
pricing that makes other e-commerce companies bleed financially. It offers
discounts on high selling and high volume products on Flipkart. In response,
Flipkart has to offer discount to protect its market share and hence adding up
to its losses. These discounts are paid by the companies to sellers and place
these cost under the promotional expenses. It is believed thafor its rivals
especially Flipkart who is the market leader to burn out. It is same
strategy company used in US to become market leader. Amazon backed
by its parent company can sustain losses longer due to its deep pockets.
6. ANALYSIS--- SWOT
(http://en.wikipedia.org/wiki/Organizational_analysis)
Figure - 25 SWOT
(Source – Internet-Marketing-
Strengths
Cost leadership
Distinct business model
Customer satisfaction
This strategy has helped the company to gain lot of loyal customers and
shareholder earning profit from the company.
Weaknesses
Opportunities
3. Amazon can still increase its product portfolio. Its rival such as Flipkart has
started selling automobiles such as car on their websites by collaborating
with automobile companies. Increase portfolio will directly translate into
higher revenues.
Threats
2. Amazon has aggressive pricing strategy by rolling out discount for the
product. It has led to company to face lawsuits from publisher and retail
industry because it is selling products in losses to have increase customers
numbers. It is under loss ever since it entered the Indian market.
Implementing cost leadership strategy sometimes becomes a source of
trouble for the company.
3. It faces stiff competition from its local rival in India, who entered the market
before them such as Flipkart. Applying its global strategy instead of local
strategy based on local market condition can lose them market share.
4. Due to loopholes in the delivery system, sometimes items are stolen while in
transit. High reverse material flow also reduces company profit.
SWOT analysis of
Flipkart Strengths
3. Flipkart website has a better search optimization for searching products and
offer buying via websites within 6 clicks to make online shopping convenient
to buyers.
Weaknesses
1. Even though Flipkart has its presence almost all over India but it still has less
penetration at rural parts of the country.
2. Early “Out of Stock” on some high selling product is very common especially
during peak seasons such festivals times.
3. Highly popular Cash on delivery payment option is not very economical for
the company. Cases of customers rejecting to take delivery on this option is
frequent. It cost them logistics charges. Cases of theft or snatching of items
from deliveryman has also occurred in some part of the country.
4. Promotional schemes such “The Big Billion day” failure due to logistics
incapability of the company to deliver such high amount of products in a very
short time.
5. Despite being the market leader in term of total sales and revenue, it is still
under losses. Its high discount policy resulted in high losses.
Opportunities
2. Indian market is still not fully covered and there is still a lot of area in the
country where online shopping is still a distant dream. Flipkart can cover
those areas to boost its sales. It will also help in maintaining its market
leader position.
3. Flipkart can start selling product under its brand like Amazon
Kindle rather than acting only as platform for buyers and sellers. It will
improve their profit margins but will also strengthen its brand image.
Threats
The Porter’s Five Forces tool is a very powerful tool. It is simple but excellent for
judging exactly where power lies. As it helps to understand not only the strength of
current competitive position but also the strength of an expected position, it is very
useful.
(http://pestleanalysis.com/porters-five-forces-analysis/)
Figure – 26 PORTER
(Source - http://successfulacquisitions.net/the-five-forces-model)
Supplier power:
E-commerce companies sell many products through its platforms ranging from
books to electronics items to cosmetics etc. For each items, there are multiple
suppliers who sell these products. In case of e-commerce, suppliers do not have
much power. For example, if you take case of mobile phones category, there are
many suppliers such as Apple, Samsung etc. who wants to sell their products through
online portal. Online customers have the ultimate choice in choosing their product
based on their requirement and cost. Manufacturer of these mobile phones cannot
come to this industry due logistics challenges. They see this e-commerce company
platform as medium to sell their products. E-commerce market in India is huge and
manufacturers cannot afford to ignore this medium from which major part of their
sales come. Due to it, manufacturers cannot put conditions on such e- commerce
websites. This makes suppliers power very limited.
Buyer power:
Today, Industry is flooded with many players in each category of product such as
mobile phones, electronic goods etc. The buyer has a lot of options to choose.
Buyer can easily switch products because of very low switching costs. Variety of
products is on display in several e-commerce companies and buyer can choose based
on its requirement. It can also compare cost instantly, which is not possible in case of
offline retail shopping. E-commerce companies roll out various schemes and
discount frequently. It reduces product price and gives customer power to choose
the best deal from any online retail-shopping portal. All these factors make buyer
power more when compared to the E-commerce companies.
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