After introducing its Prime program in India, Amazon (AMZN +0.53%) was able to quickly grow in popularity, surpassing homegrown Flipkart in shopper preference and eventually in gross sales. But Walmart (WMT 0.54%) has reinvigorated Flipkart since acquiring a majority share of the company last year, and it's planning to use Amazon's own playbook to cement that growth.
Flipkart is planning to launch a free video-streaming service available to all Flipkart Plus members, according to Bloomberg. Unlike Amazon Prime, Flipkart shoppers can't just buy into Flipkart Plus. The program requires consumers to spend about 15,000 rupees on the online marketplace, amassing 300 "super coins." By comparison, shoppers can buy into Amazon Prime for 999 rupees per year or 129 rupees per month.
Flipkart's decision to enter the rapidly growing Indian video-streaming space could help it continue outpacing Amazon in the market.
Image source: Flipkart.
A prime motivator
The value of Amazon Prime with its shipping and video benefits enabled Amazon to establish a significant foothold in India's e-commerce market. Amazon launched Prime in India with a promotion offering the first year for just 499 rupees (about $7.50 at the time). As a result, India's Prime membership grew faster than any other country in Amazon's history in the first year of the service.
Flipkart introduced Flipkart Plus about a year ago, just before Walmart closed its acquisition. The loyalty program includes fast and free shipping on select items and the ability to redeem the "super coins" earned through shopping on the marketplace for things like Hotstar premium subscriptions or vouchers for more purchases on Flipkart's properties. The addition of free video streaming could make the program much more appealing.
It's certainly worked for Amazon. Prime Video is one of the most popular video-streaming services in the country. But even with several million subscribers, its viewership is still minuscule compared to ad-supported streaming services like Hotstar's free tier, which boasts over 300 million monthly viewers.
Flipkart Plus aims to split the difference between premium and free. While it's technically a free streaming service, it requires consumers to meet a spend threshold first. For some consumers, that could be enough to switch some purchases from Amazon or other competitors to Flipkart in order to unlock that free video streaming. For others, however, it might not impact their behavior at all if they don't spend 15,000 rupees (over $200) per year online. If all they want is video, Prime or Hotstar offer better options.
Starting small
Flipkart isn't planning to produce original series or films for the video service initially. Instead, it's licensing content from studios like Balaji Telefilms and Walt Disney, which also owns Hotstar. Going the route of licensed content instead of originals, like Amazon has pursued in recent years, means significantly lower start-up costs for the video-streaming service.
Flipkart will also benefit from Walmart's streaming-video platform in the U.S., Vudu. While mostly a digital film rental and purchasing service, Vudu also has select titles available to stream for free with advertisements. Flipkart could use Walmart's streaming technology backend to help its forthcoming service keep costs low.
Walmart also stands to benefit if Flipkart's service finds success in India. It could invigorate efforts to grow Vudu through similar strategies. Walmart faces strong competitors with much larger subscriber bases in video streaming in the United States, similar to the competition in India for Flipkart. Success in India could provide a good road map to take on the competition in the U.S.
Flipkart's expansion into video streaming is an interesting way to convince shoppers to buy more from the online marketplace. It's unclear whether it'll actually attract incremental sales or if it's merely going to provide additional benefits to Flipkart's biggest spenders. Investors should look for commentary from management about what kind of impact it's seeing, or watch for increased investment in video as an indicator of its success.
