I am no mind reader of Sachin Bansal and Jeff Bezos, but I can say with reasonable confidence that neither Bansal nor Bezos has a clue how they plan to spend their billion dollars. At least, not yet. Of course, at some point, they will use the money to make huge warehouses, hire more people and perhaps make a few acquisitions. But the game being played here is something different. Today, Billion dollars is the minimum amount needed to make a buzz and create a hype. Both Flipkart and Amazon are out there creating hype and trying to out-hype each other. Sachin Bansal pulled off great one by getting the venture capitalists to invest a billion dollars. The newspapers were awash with Flipkart buzz. The Flipkart buzz would have continued for atleast a few more weeks. But, by making a statement of Amazon investing twice the amount the very next day, Jeff Bezos cut down the shelf life of the “Flipkart buzz” to 24 hours. Not only that, he redirected the buzz and spotlight to Amazon. Some street smarts the guy has. So, the billion dollar announcements is of course about making big investments in the fast growing ecommerce sector, but the larger point is – it is all about creating hype and buzz. Amazon and Flipkart are playing all the games in the book to generate as much hype and buzz as they can.
Why does hype matter ? Mindshare plays a very important role in eCommerce. Many of our online purchases are made impulsively. And in any impulse purchase, mind share plays a really important part. For example, this is how I made an online purchase last weekend – I walked into a neighborhood bookstore, browsed the latest best sellers and decided to buy the book “The Accidental Prime Minister”. How did I buy ? Flipkart prices are cheaper than bookstore prices. So, I whipped out my iPhone and placed an order on the Flipkart’s mobile app in 10 seconds flat. That’s as impulsive as it can get. Today, Flipkart dominates my mindshare. So, when I made that impulse decision to buy the book, I immediately ordered it on Flipkart. But Amazon is trying hard to occupy that mind share. So, it is doing everything it can to out-hype Flipkart. Hype matters. Hype translates to mindshare and mindshare translates to market share. So, Flipkart and Amazon are doing everything they can to generate hype and occupy the consumer’s mindshare.
Hype -> Mindshare -> Market share
The fight for the number one slot : Today, Flipkart is the number one. But, thanks to Amazon’s money and technology power, it believes that it has a very good shot at the number one slot. The second reason for this mad frenzy is the fight for the number one slot. Ask any serious marketing student and he will tell you the disproportionate advantage any number one player in the market has. The number one player garners a disproportionately high market share and disproportionately high profits. In most markets, the market distribution graph between the number one and the rest of the player looks like this.
A 100 storey sky scraper standing head and shoulders above and the other 40,30,20 floor buildings. Look at the Social media market – Facebook owns a disproportionally high market share compared to the next rung of players like LinkedIn, Google+, Pinterest. Both Sachin Bansal and Jeff Bezos know this really well. Sachin is fighting hard to retain and establish himself in the number one slot. Amazon is using its muscle power to usurp the coveted slot from Flipkart. We can expect this fight to go for the next 2-3. years Until then, we can expect many more such fireworks. I expect the next round of fireworks in the upcoming Diwali season where both the players will do their best to woo customers with deep discounts.
The Indian eCommerce market is the stage. Flipkart and Amazon are its main actors. There is going to be more drama and fireworks on this stage for the fight for the number one slot. Sit back and enjoy the drama unfold and find out – who is going to blink first ?