With 100 million new Internet users each year, Amazon buys a lot in India, but a major new investment in Flipkart, a major rival, means that the battle to dominate the fast-growing e-commerce market is going to warm up.
Flipkart announced this week that major international companies, including Microsoft, eBay and Tencent of China, have pledged investments totaling $ 1.4 billion, among the largest amounts ever generated by an Indian startup.
The 10-year e-commerce company needs all possible help to compete with Amazon after the Seattle giant has created 1.25 billion people in India as a global strategic priority, affecting Investment funds of $ 5 billion.
"They must have a significant amount of money to fight in the market with Amazon," said Jaideep Mehta, director of South Asia at International Data Corporation.
Every three seconds, an Indian connects to the Internet for the first time, according to Google. One in three Indians currently uses the Internet, but the number is expected to increase by 300 million by 2020, mainly due to the increasing use of smartphones.
McKinsey analyst Ashish Tuteja said that 70% of online sales in India were made on a smart phone. "This is a mobile market first," he told AFP. Projections for market size by 2020 differ enormously, ranging from $ 50 billion to $ 120 billion. But all agree that it is worth far more than the current $ 15 billion, thanks to an expanding middle class and an expanding Internet usage.
Amazon opened its doors only in India in 2013, but quickly surpassed the local start-up Snapdeal to become the second largest player.
Electronic retailers in India generally adopt a "market" structure, acting as platforms that connect buyers and sellers rather than store their own products. Amazon has marketed its services aggressively, turning the markets around the country with its "chai carts" to sell the idea of e-commerce to small traders on a cup of tea.
As part of another initiative called "Feet-on-Street", an Amazon employee would be sent to photograph his products and help them register online. Flipkart, Amazon and Snapdeal are now engaged in a price war, with each Indian festival an opportunity for aggressive cuts.
"At some point they will have to earn money," Mehta said – some experts say will require consolidation of the sector.