Does Flipkart need to move step in step with Amazon?

Flipkart, the leading Indian eCommerce company recently launched its own brand of Android Tablet devices, starting with a Digiflip Pro XT712. Flipkart claims that this step will take it closer to building an eCommerce eco-system. But, with the low price positioning of this device in an already crowded tablet & smartphone market – does this me-too strategy have a strong case?

(Near) Clones from different times, in different places

Flipkart is often referred to as being the Amazon of India. Flipkart, like Amazon started by selling books online and then expanded into other product categories. There was then a step towards selling eBooks via the eCommerce website. It then altered the business model to an eCommerce Marketplace model. Despite these similarities, does the move into tablets space seem right?

Indian Smartphone & Tablet Industry?

Questions come up immediately – Is this industry attractive enough? Is there enough incentive to compete here and try to achieve positive network effects? The Smartphone and tablet industry in India is an extremely crowded industry with over 60+ players in the space. A cluttered marketplace

Strong price competition and product commoditization are strong characteristics of this ma
rket
. The leading brands in India Samsung, Micromax & Karbonn take up 60% of the Smartphone space while the rest is extremely fragmented. Add to this the recent announcements at Google I/O 2014. The AndroidOne initiative will give further impetus to low-cost device makers making it hard for consumer to differentiate one tablet/smartphone from the other. And amidst all these dynamics, ENTER FLIPKART at the lower end of the price range.

A look from Amazon’s perspective

Amazon has a strong  experience with consumer electronics devices. The Kindle, when launched was the first of its kind. It was a new category of device a.k.a the e-reader with the much talked about e-Ink. It was a niche device that could render the Amazon eBook format and could leverage cloud delivery infrastructure downloading books via WiFi and WhisperNet.

The new Smartphone,  Fire Phone is positioned as a high-end niche device, competing not with the zillion other Android phone makers, but rather a few premium Smartphone makers in the US market – which is a completely different ballgame compared to the emerging markets.

The value proposition of Amazon’s Fire Phone is also well-defined and centered around Amazon services. Amazon Prime has substantial uptake in the US market. Bundling this subscription allows Amazon to further expand its user base. Trying to bump up transactions through the use of Amazon-specific apps & features is a clear intent. How well that strategy pans out or how drastic that step could be is a debate out of this scope.

For Flipkart, its not the same arena?

In fact it is not even the same game anymore. While this appears as a me-too response to the Amazon Fire Phone launch, I believe that achieving competitive parity can be useful but need not always be meaningful.

Digiflip, Flipkart’s inhouse brand, primarily appears to be an ‘electronic accessories’ brand. A Tablet to augment this line up of accessories is like driving in the opposite direction in a one-way to get into the business. In terms of positioning as well, the Digiflip Pro when compared to the Fire Phone is at a relatively different position on the pricing spectrum.

Over 2000 free eBooks are being offered as a goodie with this device, Flipkart also offers the Flipkart First subscription service, but I do not have enough to compare the popularity of this with that of Amazon Prime – I doubt though that similarities exist.

Will this boost online transactions?

It is widely said that e-Commerce & m-Commerce are the next big purchase channels for consumers. Flipkart is now a leading destination for device makers to sell Smartphones. Motorola sold over 1 million handsets through this exclusive-online retail partner in 5 months. Xiaomi is also planning to partner will Flipkart in its entry into the Indian market. Yet another Smartphone partner is in place – Karbonn, with whom Flipkart made exclusivity deals deal for cheap smartphone.

While these partnerships will boost the main line of business, the entry into ‘cheap tablet’ space could send the wrong-signal to these partners. These partners need to trust Flipkart to sell their devices on the website, than to feel threatened by Flipkart’s cheap competitive offerings.

That being said, would it not be more interesting to partner with these Android device makers like Samsung, Motorola, Micromax, Xiaomi, Karbonn and others to preload a Flipkart App on the device? Flipkart might want to extract more value at a lower cost by preloading the App an fulfil its eco-system intent than to start the line-of-business which is outside is core-business.

Leverage firm capabilities to find growth beyond the core

Flipkart has already started experimenting with its core business model by spinning off its logistics arm – eKart. While I see good merit in leveraging core-competencies to grow beyond its core, investing in this new line of business to gain competitive parity raises more questions than it answers.