Why Walmart must fight the Amazon algorithm to make Flipkart viable

Amazon’s Google-like algorithms help vendors control their catalogue to win customers.

Did you ever wonder why, in certain categories of skincare, electronics or consumer products, an unknown brand would be on top on Amazon.in?

The answer lies in the fact that Amazon.in is very serious about onboarding its customers to succeed, and not just to fulfil the availability of stock on the platform. Amazon's algorithm decides who is number one, based on the sales of the brand, the entire cataloguing and the photos that are driven by Amazon's processes.

This allows the algorithm to recognise the product catalogue and availability from the brand. What’s even better is that the seller has control over the promotions.

Yes, these are like the keywords that are purchased on the Google model. But, here the buying of keywords doesn't necessarily put you on top of the page, the algorithm decides your page ranking based on sales, availability of the catalogue, and the keywords tagged.

Sources in the industry say that Amazon has a strong backend. On one end, its algorithmic capabilities allow it to manage scale more efficiently.

Flipkart has strength in areas where Amazon lacks, which is apparel and accessories. Now that’s where you see Myntra being Flipkart's golden goose. But the task at hand for Walmart is to get many more vendors to participate on the platform.

Here is why

Amazon has more than 200,000 sellers active sellers on its platform. Amazon wants sellers to succeed, not just be commoditised.

If you speak to Amazon Launchpad’s head, Sateesh Srinivasan he will tell you that there were more than 94 companies that are selling on Amazon in high numbers and in revenue. To name a few, SagarFab, Wow and MCaffeine are some of the brands that are rising fast on the platform because of the Amazon processes they follow to win the consumer. These include regular cataloguing and refreshing stock, otherwise the algorithm will bring down the page ranking of the company.

This is where Walmart must watch out because when they switch to Flipkart they will find that of 300,000 vendors, only 30,000 to 40,000 are active.

The rest are interested in Amazon because of its processes and its customer-centric and client-centric policies. This is why Myntra and PhonePe saved the day for Flipkart by keeping the interest in the company alive during the acquisition.

Flipkart’s strengths

Does Flipkart have these kind of algorithms too? Yes, they do, but they are successful in making keyword search relevant and are not tied to the success of the vendor. In such a platform, the business is trying to offer the lowest possible price rather than combining historic performance of the vendor along with customer feedback. This gives the vendor a chance to be responsible to bring the best catalogue to the consumer. The other thing that Flipkart does not do is to let the vendor manage the marketing themselves on the platform.

The vendor (the brand) unfortunately does not have the flexibility of managing their page. It is structured and limited. It is here that Walmart has to study and do extensive research on Flipkart to increase customer retention.

Sources say Flipkart's algorithm must be tied into every process to stay in the journey, and increase the stickiness of vendors.

“Data is where the opportunity lies for Amazon and Walmart to take young Indian brands global,” says Vikas Lachhwani, founder of MCaffeine, a personal care brand that is active on ecommerce platforms.

It's data that makes Amazon a winner and replicate its success in markets across the world. Walmart's “everyday best prices” are a thing of the past in the brick-and-mortar world; today it's about dynamic data pricing with algorithms, which only Amazon has perfected.

While Walmart makes its plans for India, it has to get Flipkart working in the direction of using algorithms to win customers, vendors, and for dynamic pricing of products.

If this is not done, Amazon will continue to dominate the Indian market and will drive the value of Flipkart down to hurt Walmart.

“With both the US giants in India there will be many other smaller companies participating in the India growth story in the form of consumption,” says Manish Chowdhary, co-founder of Fit and Glow.

The keyword search for Amazon costs Rs 15 to Rs 25 per each word or phrase. This may seem expensive but it puts power in the hands of the vendor.

This also makes it the most popular technology for vendors to win customers on keywords.

However, vendors know that the Amazon algorithm cannot be replicated because it also understands customer reviews to rank products.

Walmart must take these cues immediately if it wants to win the global battle against Amazon.