How it made itself Indian: The amazing rise of Amazon in the country
In 2016, especially during the festival season in October, Amazon became India’s only “The Everything Store” online – a status it enjoys in its home country, the United States.business Updated: Nov 07, 2016 11:00 IST
“This is just the beginning… we are building the most customer-centric company based on a large selection, low prices and fast delivery,” says Amit Agarwal, head of Amazon India.
He sounds rehearsed. His wife, too, thinks so.
Agarwal talks like Jeff Bezos. He has spent 18 years in Amazon, and was one of the eight technical advisors, popularly called “shadows”, to CEO and founder Bezos.
But what sounded dissimilar was Amazon’s growth in India – it is the fastest-growing market in the company’s history.
It seems like yesterday that Amazon started its marketplace (three years ago) in the country, and its rivals were miles ahead.
Not anymore. In 2016, especially during the festival season in October, Amazon became India’s only “The Everything Store” online – a status it enjoys in its home country, the United States.
Though most of its rivals, including Flipkart and Snapdeal, continued to sell clothes, electronics, large appliances and mobile phones in abundance, Amazon also sold virtual “Prime” memberships and everyday essentials, including ‘churan’ and ‘hing’, in large quantities – 14% of all products sold on Amazon was grocery.
“It was an inflection point is e-commerce history… Customers bought every kind of thing you can think of,” says Agarwal.
That wasn’t easy, and a lot was at stake. If Agarwal failed, Amazon would have paid a price. Apart from China, where Amazon couldn’t do much, India was the only high-volume market.
It is also the fastest-growing internet economy, with over 350 million internet users, the second-largest in the world.
“You need investments, a long-term outlook, patience to build the infrastructure and selection, and allow the internet to grow,” he says.
It already has the largest selection — 85 million products — and has committed $5 billion in investment, the most by any e-commerce company in India.
Agarwal’s tone changes, his lines are not rehearsed anymore. “Everything we do in developed countries is more critical for a country like India,” he says, as it is like a cluster of 29 countries (states), different in culture, language, preferences, buying behaviour and economic status. “We are as Indian as any other Indian company, and the shareholding of any company is as foreign as Amazon.”
And there are nuanced changes as well — cash-on-delivery, special logistics tie-ups and seller programmes. One such programme was Amazon Chai Cart, about which Bezos mentioned in his recent letter to shareholders. “We deployed three-wheeled mobile carts to navigate in a city’s business districts, serve tea, water, and lemon juice to small business owners and teach them about selling online,” he wrote.
In four months, the team travelled 15,280 km across 31 cities, served 37,200 cups of tea, engaged with over 10,000 sellers, and helped them come on board. “So, we invented Amazon Tatkal (a studio-on-wheels offering a suite of launch services), which enables small businesses to get online in less than 60 minutes,” he added.
Agarwal realised logistics was a pain point, so he launched Easy Ship — for sellers to deliver products in over 19,000 pin codes using Amazon Transportation Services, Blue Dart, and India Post. Two years ago, Amazon tied up with the government’s postal department to reach the country’s far-flung areas. In October, 97% of all pin codes ordered at least once on Amazon, making it the most penetrated e-commerce platform in the country.
For those in small towns who felt awkward to buy online, there was Udaan – a shop with television screens, where the shop owner would help people in the locality place their orders.
He then turned dying STD booths and internet cafes into warehouses and shopkeepers into sellers. “The Indian entrepreneur is very flexible... We just have to provide self-service, mobile accessible products... Whether it is a seller, a pick-up point, a delivery point, or a cataloguing point, it is a great way for us to scale,” says Agarwal.
In the US, Amazon has lockers from where a buyer can come and pick his product. Agarwal feared if he had lockers in India, they would get stolen. So, he asked neighbourhood kirana stores to keep delivered the products. He calls them “human lockers”.
According to industry experts, Agarwal’s strategy of tackling one problem at a time paid off for the company in India. “E-commerce is so fast you cannot afford to make too many mistakes. Competition is right behind you, and Amazon did all the right things and stuck to its core strategy,” says Sanchit Vir Gogia, chief analyst and CEO of Greyhound Research.
Amazon also allowed sellers to become proxy stockists — it has over 100 seller fulfilment centres, and around 27 warehouses. The company stocks over 2 million products in those warehouses, which it can deliver within 48 hours.
The Prime membership ensures faster and prioritised delivery. It was the largest-selling product during the festival season at Rs 499 for a year’s subscription.
“People won’t buy membership for faster delivery of mobiles, but if I tell them that you buy anything and we will deliver it fast and free, then it makes sense,” says Agarwal.
“Any platform needs to have a wide enough selection to make it a habit... The real game is revenue per customer and not a product or GMV game,” says Alok Kshirsagar, senior partner, McKinsey & Co.