Amazon’s Foray in India

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With regards to the vast rural population, which predominantly dealt in cash transactions, and having limited internet connectivity, Amazon capitalized on the existing network of small retailers / shops, called the mom-and-pop stores. Amazon enlisted these mom-and-pop store owners as partners in its delivery platform.

In small villages and remote areas where few people have internet access, residents can go to their local store and use the owner’s internet connection to browse and select goods from Amazon.in. Store owners record their orders, alert customers when their products are delivered to the store, collect the cash payment, and pass along the money, after deducting a handling fee, to Amazon. This arrangement, along with the regular cash on delivery payment options, smoothly overcame the challenge of conducting e-commerce in a cash economy.

Amazon’s Performance in India

Following chart illustrates the financial performance of Amazon over the last three years:

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The following chart illustrates the market share of Amazon, Flipkart and Snapdeal over the last three years:

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Below is a comparison of Amazon with its peers on other key parameters:

Parameter

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Launched in

June 2013

April 2013

2010

No. of Sellers

16,000+

30,000+

100,000+

No. of Listed Products

19 million+

20 million+

1 million+

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Factors Contributing to its Performance

Following are the factors contributing to Amazon’s performance in India:

- Heavy Investment:

Amazon India has received over INR 9,600 crore since its inception. Further, Amazon has filed to increase its authorized capital in its Indian subsidiary from INR 8,500 crore to INR 16,000 crore. This high investment has enabled Amazon to develop warehouses in major hubs, setup delivery chains, undercut costs of products by charging lesser commission from traders on its platform and marketing aggressively to build the brand.

- Adaptation to Local Culture:

Indians celebrate festivals in a big way and they do spend lavishly during festivals and to cash on the festival season, all the e-commerce companies in the country have offered various schemes. Amazon has invested aggressively to garner as much market share during the annual sale event on the back of discounts and the promise of faster services and better user experience. [pic 10]

Amazon understands that to succeed in emerging markets, they need to adapt their business model to the market rather than expecting the market to adapt to their model. Few examples where Amazon has displayed such adaptation are:

- Operating as a marketplace instead as a retailer

- Offering customers cash on delivery service.

- Development of warehouses and local delivery channels

- Partnering with local grocery stores for rural reach

- Long-term Commitment:

Jeff Bezos understands that markets like India should be seen through the lens of their potential rather than short-term ups or downs. Amazon’s horizon of performance mapping is not from one year or two years point of view but from five to seven or 10 years period. This long-term view is critical in a business where profits are nowhere in sight.

- Country Leadership

For an international company for a successful entry in any country, the right local leadership and the right organisational structure are critical. Amazon has adopted a flat and simple organisational structure. For a company established in developed economies like US, emerging markets like India are difficult places to do business, as they are bedeviled by corruption, bureaucracy, volatility of politics and policies, and poor infrastructure. However they offer large and fast growth potential.

The willingness to make a long-term commitment to the new market or to adequately trust local leadership, combined with the flexibility to deviate from the products, business models, and operating systems that have worked at home, drives many companies to a successful international business strategy.

Suggestions to improvise the strategy

- Improvise on the strategy for efficient and cost effective shipping process

Amazon has recently collaborated with Indian railways for interstate shipping however delivery process has not been explored with the local train network in Mumbai.

It was a user example that the product delivery location being on the western railway suburb was shipped first to a nearby warehouse location which is around 35 kms from the delivery location. This wasted time and resources along with adding the cost to the delivery process. This should be ideally shipped first through local train network and then on road delivery by the delivery individuals. This can be tried based on the model used by Mumbai dabbawalas for the delivery in the Mumbai region. This will save time and cost eventually resulting in Customer delight.

Such enhancements to the delivery process can be made by studying geographies and local transport mode while considering the international expansion in a geography.

- Diversifying in the supplements and compliments product and services

Amazon should now try to diversify in other product and services area which will complement or supplement their current business.