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Amazon and Walmart Are All Set to Bounce Back in India

By Harsh Chauhan - May 27, 2020 at 1:22PM

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Restrictions on sales of non-essential items during the COVID-19 lockdown hurt the two e-commerce giants in India.

The COVID-19 outbreak in India has kept people indoors for more than two months now as the central government has extended the lockdown -- which originally began toward the end of March -- multiple times. This should have been an ideal situation for both Amazon (AMZN 1.42%) and Walmart (WMT -0.37%) to step up their game in the Indian market as consumers were looking to shift their purchases online to comply with the government's stay-at-home orders.

Reports suggest that e-commerce players were witnessing a 20% to 30% jump in orders just before the lockdown went into effect. Sadly, Amazon and Walmart haven't been able to take advantage of growing e-commerce demand in India because of the government's restrictions.

Two computer keys, one with India's flag on it and one with the word "e-commerce"

Image source: Getty Images.

India's lockdown has hurt Amazon and Walmart

The Indian government's strict lockdown measures threw the country's e-commerce supply chain off balance. Lack of clarity among law enforcers in the early phases of the lockdown created challenges for Amazon and Walmart as the delivery staff was reportedly being stopped by the police from carrying out their duties.

As a result, Amazon and Walmart had to suspend their logistics operations, while the closure of warehouses by the local authorities turned out to be another challenge. Both companies gradually got back on track once the government's instructions about allowing the delivery of essential goods became clearer.

However, both Amazon and Walmart lost an opportunity as they were not allowed to deliver items that were deemed "non-essential" by the government. As a result, sales of consumer electronics had to be stopped, and the American giants were restricted to delivering only packaged foods, groceries, and personal care products.

Operations are now limping back to normal as deliveries of non-essential goods are now allowed, but the damage has already been done. At the beginning of May, Indian business daily The Economic Times reported that Amazon's India business fell to less than 10% of gross merchandise value during the lockdown.

A similar story unfolded at Walmart. CEO Doug McMillon recently pointed out that the company's Flipkart e-commerce business in India was dented for several weeks on account of the Indian government's restrictions with respect to non-essential items.

All of these headwinds have reportedly forced Amazon and Flipkart to postpone their summer sale events in India. That's not surprising as e-commerce companies in the country are operating at 30% capacity (according to industry watchers) on account of supply and logistics issues. But the good news is, Amazon and Walmart's short-term headwinds could give rise to long-term gains.

The bigger picture remains intact

The good news for Amazon and Walmart-owned Flipkart is that demand remains intact. That's evident from the fact that there has been a remarkable surge in orders and product searches on online shopping platforms since the restrictions were eased.

Local retailer Snapdeal has witnessed growth in order volumes on the order of 2.4 times since the restriction on sales of non-essential items was lifted. The pent-up demand for goods is expected to lead to a bump in sales for e-commerce players in the coming days. Moreover, as shopping malls in India remain closed even in the novel coronavirus-free areas, consumers will have to resort to online shopping to get their needs met.

This could give Amazon and Walmart's business in India a shot in the arm thanks to their expansive delivery network in the country.

At the end of 2019, Amazon had more than 50 fulfillment centers in India spread across 13 states. The e-commerce giant has a total storage space of over 25 million cubic feet that it can put to use in these trying times. Amazon also has over 1,400 delivery stations in India and a network of 23,000 retail outlets that help it execute last-mile deliveries.

Similarly, Walmart has also stepped up its game to boost delivery and warehouse infrastructure by converting its cash-and-carry stores into fulfillment centers. Fewer than two years ago, Flipkart reportedly had around 34 to 35 warehouses in India. The company has been expanding its base ever since and recently opened two new warehouses in the north Indian state of Haryana that are spread across 900,000 square feet.

In February, Flipkart announced that it's now delivering to 100% of serviceable pin-codes in India for nearly all of its product categories.

So, Amazon and Walmart can bring more users into their fold during these times, strengthening their hold over the consumer discretionary space in India, where they reportedly hold a combined market share of over 60%.

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