Inside Amazon's game plan for India

The e-commerce company has secured 100 million-plus customers in India, across
verticals ranging from payments to exports. Despite regulatory hurdles, it is bullish on the
Indian market and is making big investments for further expansion
BY NAINI THAKER FORBES INDIA STAFF
PUBLISHED: SEP 29, 2023 03:07:59 PM IST
UPDATED: OCT 3, 2023 10:33:44 AM IST
Dhaval Patel plans the festive collection for his brand, Navrang Handicrafts a year in advance.
Patel started his retail store in Rajkot (a city on the west coast of India) in 1990, and for years his
sale would range between three to four products per day. Around the pandemic, for months
there was no sale, and the small-scale entrepreneur had almost made up his mind to shut
shop. A few months later, someone suggested he list his products on Amazon through its Local
Shops programme. Almost immediately, his sales went up by 50 percent. “We receive orders
from every part of India, sometimes even cities that we’ve never heard of,” he says. To keep up
with this demand, he’s had to expand.
Like Patel, there are over 12 million sellers in India who are now using Amazon as a platform to
sell their products, not just in India but even globally. “For sellers - large and small - Amazon
helps them reach a massive customer base,” explains Manish Tiwary, country manager, India
Consumer Business, Amazon India.
The upcoming festive season in October and November is a particularly busy time. The e-
commerce giant claims that last Diwali, it saw close to 30,000 sellers cross Rs1 lakh (AUD
100k) in terms of sales and almost 700 to 800 new product launches. According to a recent
study by Nielsen Media commissioned by Amazon India, 81 percent of consumers intend to
shop online during this festive season and one in two consumers are willing to increase their
spending this festive period compared to last year. The study further states that consumers
plan to spend across a range of categories during this festive period. About 75 percent are
interested buying electronic gadgets and products (smartphones, TVs, refrigerators, ACs),
luxury and authentic beauty brands, home furnishing/improvement items and consumables,
online. “The Prime Day sale has also indicated that users seem to be getting back to normal,
and the sentiments look positive. This Diwali seems to be the first one since Covid-19 where the
user is feeling bold enough to plan—so we’re expecting this festive season to be a big one,”
says Tiwary.
Bigger piece of the pie

According to Statista, the e-commerce market in India has grown rapidly over the last 4-5 years.
In 2018, the market size was $38.5 billion, which grew to $69.2 billion by 2022—a compound
annual growth rate (CAGR) of 22.5 percent. However, this only accounts for only 6-7 percent of
the total retail market in India. As one of the largest players in the race, Amazon India has
played a significant role in growing the market and the infrastructure around it.

Amazon started its India operations in 2013, selling books. Since then, the business has grown
multi-fold, with presence across sectors ranging from grocery and pharmacy to OTT and music.
With a 100 million-plus customer base, Amazon has been extremely bullish about the Indian
market. In 2020, during Amazon Smbhav’s event, founder Jeff Bezos said, "I predict that 21st
century is going to be the Indian century.” Amazon has committed to investing an additional $15
billion in India by 2030, taking the total up to $26 billion across all its businesses.
When Tiwary joined the company in 2016, the platform was much smaller in India. “Now, when I
travel with my work laptop and people see the Amazon stickers on it, 70-75 percent of the
people sitting next to me have shopped or sold on Amazon—and they have good and bad
anecdotes. This just goes to show how in the last 10 years, the platform has become a part of
India’s social fabric,” he says. Amazon has also been selling freezers for cold storage and
electric scooters on the marketplace. “Our aim is to remain customer-centric, so we never
restrict ourselves from saying we can’t meet a certain customer demand,” reckons Tiwary.
One of the biggest growth drivers for the business has been the Prime programme, which was
launched in India in July 2016. The subscription, which offers which offers a variety of benefits
from faster deliveries to OTT subscription, Tiwary claims is “one of India's most loved paid
loyalty program.”

Akshay Sahi, director, Prime and Delivery Experience, Amazon India, explains, “Over the years,
we have seen that Prime membership is a bestseller during all key sale events, and we now see
a lot of our new Prime members coming from smaller towns.” The 2023 Prime Day Sale, was the
biggest in India ever, with 14 percent more Prime members shopping as compared to last year,
claims the company. “This year, we saw a peak of 22,000+ orders being placed by Prime
members in a single minute; close to five smartphones got sold every second, with 70 percent
demand coming from Tier II & III cities,” claims Sahi.

With the onset of the UPI revolution, Amazon Pay has become a lever in driving the platform’s
success in India. Over the years, Pay has grown to 8 crore+ users for UPI, 5 crore+ for Amazon
Pay balance, 80 lakh+ for Amazon Pay Later, and 40 lakh+ for Amazon Pay ICICI bank credit
card. Despite growing competition, Mahendra Nerurkar, VP, India & Emerging Markets Amazon
Payments says, “We continue to focus on improving resilience, latency and success rates for
our core payment infrastructure and making our payment products more intuitive and
rewarding for any customer to adopt.” Innovation to stay ahead of the curve continues, as
conversational payment via Alexa—where users can pay bills through voice commands—
remains a priority.
Additionally, its global selling programme has helped small and large scale sellers expand
beyond the Indian market. Currently they have close to 125,000 sellers who are part of the
programme, on track to cross $8 billion in cumulative exports by end of 2023, claims the
company. “It is important to note that these are not raw materials or commodities, these are
finished products—from small sellers who would otherwise not have had the ability to get
through the complexity of exporting it anywhere in the world,” explains Tiwary. The marketplace
has also signed a deal with India Post to cover cross-border logistics and shipments for
businesses, to help them sell internationally. Sellers can drop their shipments off at over 100
India Post mail export centres, which will then be exported.

Sellers scaled up as the B2C business started picking up, when Amazon India realised there
was a growing demand in the B2B space as well. For instance, a large corporate would struggle
to find a good tissue paper vendor who would provide quality products along with the required
GST invoices. On the other end, a small time tissue paper manufacturer in a Tier 3 city would be
looking to expand. Says Tiwary, “We connected the two, with Amazon Business. A corporate
has multiple options for all their needs, the process is transparent and hassle free. On the other
end, the seller can scale up faster. It’s a win-win!”

Launched in 2017, Amazon Business started with 14,000 sellers and currently they have over 10
lakh sellers who offer a large selection of over 19 crore GST enabled products—from office
supplies to large appliances. The main challenge that most business consumers faced,
explains Suchit Subhas, director, Amazon Business, India, “Since indirect spends are spread
over large number of stock-keeping units (SKUs) and vendors, they provide less room for
negotiation for procurement team. This leads to increased procurement costs thereby having
direct impact on profitability of the company.”

However, as Amazon continues growing Tiwary says, “the overall penetration of ecommerce is
nothing to write home about.” Clearly, there is a long way to go. In terms of market share,
Flipkart ($23 billion gross merchandise value or GMV) and Amazon ($18-20 billion GMV) lead on
scale, with the two having about 60 percent market share currently, according to Bernstein.
Reliance is third in the sweepstakes at present ($5.7 billion e-commerce sales) driven by
attractive categories of fashion (Ajio) and JioMart (e-grocery).

Currently, the largest category within ecommerce is fashion—with a 25 percent GMV share, the
category grew by over 40 percent in 2022, as per Bernstein. Players like Reliance’s Ajio, Myntra
and even Nykaa are large competitors for Amazon in this space. The online grocery space for its
Amazon Fresh vertical too, sees stiff competition from the likes of BigBasket, Blinkit, Zepto and
Swiggy Instamart. Even for its B2B business, competitors such as Flipkart and Udaan are
growing fast.

Even for Amazon Pay, the company has humongous rivals including PhonePe, Google Pay and
Paytm, which in terms of number of transactions are ahead of Amazon Pay. According to
numbers available on the National Payments Corporation of India (NPCI) website, Amazon Pay
UPI’s numbers dropped from 75 million transactions in January 2022, to 57 million in May 2023.
The value of transactions has fallen from Rs 6,300 crore in January 2022 to around Rs 5,700
crore in May 2023, as per a Moneycontrol report. However, its credit card in partnership with
ICICI Bank is one of the most successful products in the country, with more than 4.5 million
users in less than five years.

With such cut-throat competition, what is Amazon’s strategy? “There is no strategy for
competition,” smiles Tiwary, during a conversation with Forbes India at Amazon office in
Bengaluru. According to him, competition is healthy, “it pushes players to innovate further.”
Investing in India

Amazon’s $26 billion investment in India will focus on goals including increasing exports,
digitisation of small businesses, and generating employment. “We pledged to digitise 10 million
small businesses enable $20 billion in ecommerce exports, and create two million direct and
indirect jobs,” Tiwary says. Of this, Amazon claims to have digitised over 6.2 million small
businesses already, enabled exports worth $8 billion, and created over 1.3 million direct and
indirect jobs in India. Of its total investment, AWS’ planned announcement of $12.7 billion by
2030 is expected to contribute $23.3 billion to India’s GDP by 2030.

Currently, the ecommerce giant boasts of reaching 100 percent pin codes in India. Of these,
close to 60 percent of the demand is from Tier-II and Tier-III cities. “Improving infrastructure
closer to smaller towns is necessary—for instance warehouse capacity of a small town in the
Northeast might not be enough,” explains Tiwary. In January 2023, the platform launched
its own air cargo service called ‘Amazon Air’, to make the supply chain smoother. “Similarly, we
were the first one to sign a deal with the Indian Railways where we will be using the country’s
direct freight corridors for order deliveries,” adds Tiwary.
On the regulatory front, there are some daunting challenges. Foreign direct investment (FDI) in
the ecommerce sector is restricted to 25 percent in the marketplace model and 100 percent in
the business-to-business (B2B) model, limiting the ability of foreign ecommerce companies to
invest in India. As per a TechCrunch report, these local legislations prevent “marketplace-
model firms from owning, selling, and pricing goods directly.” According to a Bernstein report,
both Amazon and Walmart’s Flipkart have reduced its stake in affiliate sellers from 49 percent
to 24 percent.

“These regulatory issues, which are important to safeguard the interests of Indian consumers,
can slowdown the growth of ecommerce companies in India as they adopt these. However, the
Indian government has taken many steps to address these regulatory issues. For example, the
government has simplified the FDI rules for the ecommerce sector and they have also proposed
a new data protection law that would streamline the data localisation requirements. The
government is working to simplify the tax regime for e-commerce companies,” says Rajat Wahi,
partner, Deloitte India.

Tiwary and his team have been working closely with the government on the draft e-commerce
policy as well. “As internet penetration in India has grown, we definitely need regulation and a
policy that protects consumers, yet allows the digital economy to flourish,” he says.

India-led innovation

Before Amazon set up operations in India, it had presence across North America, Japan, Europe
and China to an extent. “Cash on delivery wasn’t a feature in any of these geographies, Amazon
India was the first to introduce it,” Tiwari says. Even the distribution network had to be tweaked,
as a majority of sellers being onboarded on Amazon, were SMEs—meaning, often they couldn’t
deliver products to warehouses. So for the first time, packages were being picked up from
sellers directly. Innovation has been at Amazon India’s forefront from ‘Day One’. In 2013, when
the global giant set up operations here, we were still in the 2G and 3G era. “We realised the
customers were facing latency, so we launched a smaller sized app for when people are in bad
network areas. This has worldwide implications, particularly for emerging markets,” he adds.
Keeping localisation in mind, the marketplace is available in seven Indian languages including
Hindi, Tamil, Telugu, Kannada, Malayalam, Marathi and Bengali besides English to provide
users with a better customer experience. “Of all the global markets Amazon is present in, India
is the only one which already has the app in seven languages, and growing,” says Tiwary. To
increase ecommerce adoption for small businesses and easing their ecommerce journey, the
company has also introduced a first of its kind generative AI-based personal digital assistant
called 'Amazon सहAI (means assistance with AI)’. ”It provides customised support to sellers on
amazon.in, reducing their workload and simplifying time-consuming steps such as registration,
listing, advertising support among others,” explains Tiwary.

Even after a decade, Tiwary believes they are still at ‘day one’. With deeper expansion in existing
verticals and an innovation-led approach, despite regulatory challenges the ecommerce giant
continues to remain bullish on the Indian market. Tiwary stands by the core value of the
company which he says is, “stay obsessed with the customer, because they are never satisfied
and they keep raising the bar for us.”

Source - https://www.forbesindia.com/article/take-one-big-story-of-the-day/inside-amazons-
game-plan-for-india/88633/1
Amazon Users in India Will Get Less Choice and Pay More Under New Selling Rules

An Amazon order and collection point in Tumkur, India, in December. New e-commerce rules in
the country will make many items unavailable, at least temporarily, to shoppers in India as of
Friday.Credit...Rebecca Conway for The New York Times
By Vindu Goel
• Jan. 30, 2019

NEW DELHI — On Friday, Indian consumers will wake up to an emptier, more expensive version
of Amazon’s shopping service.

Gone will be iPhones and cheap jumbo packs of Pampers diapers. Fewer varieties of Maybelline
cosmetics will be available, and Amazon’s own Echo smart speakers will vanish entirely.

In all, more than 400,000 items that account for nearly a third of Amazon’s estimated $6 billion
in annual sales in India will probably disappear at least temporarily from the local version of the
company’s service, as Amazon tries to comply with new e-commerce rules imposed by the
Indian government.

Amazon, which had structured its operations carefully to adhere to a 2016 revision to the
country’s e-commerce rules, said it had asked the Indian government to clarify the new policy
and give it an additional four months to comply. “We remain committed to be compliant to all
local laws, rules and regulations,” Amazon said in a statement.

Barring a last-minute reprieve, Amazon’s leading rival in India, Flipkart, which effectively
became a Walmart subsidiary last year, will also be forced to remove thousands of products
from its service, particularly in the apparel category, where it sells many clothing items made by
affiliated companies. Flipkart could lose as much as a quarter of its sales in the short term,
according to Technopak, an Indian consulting firm.
A spokesman for Walmart, which spent $16 billion for its controlling stake in Flipkart, declined
to comment on the new policy or its potential effects.

The change underscores the risks American companies face in India, which ranked No. 77
globally in the World Bank’s most recent survey on ease of doing business.

With 1.3 billion residents, the country would appear to be an attractive market. But it poses
many challenges, including bad roads, low per-capita incomes, a cacophony of languages, and
a consumer economy that runs largely on cash.

The country’s millions of shopkeepers and small traders wield tremendous power in votes and
campaign donations. And its large corporations, many of them closely tied to the government,
are eager to wrest Indian consumers from the embrace of MNEs like Amazon, Facebook and
Google.

Prime Minister Narendra Modi traveled to Silicon Valley in 2015 to urge tech companies to
invest in India.

But with national elections looming in May and growing disenchantment with Mr. Modi’s
policies, his government has recently championed a vigorous economic nationalism, passing or
proposing policies to rein in the power of foreign financial firms like Visa and
Mastercard and tech companies like Facebook and Google.

Just after Christmas, it was the retailers’ turn. Mr. Modi’s administration announced that,
effective Feb. 1, foreign-owned e-commerce services like Amazon and Flipkart could not sell
goods through affiliated companies. Direct sales to consumers had been banned earlier, but
each of the two companies had set up a complex array of related companies to indirectly offer
popular products at low prices with fast delivery.

To continue operating, Amazon and Walmart will now have to turn their sites in India into digital
bazaars for independent merchants, becoming more like eBay, which charges for certain
services but sells nothing itself.

“People have started to buy China’s viewpoint: We need to build domestic assets and domestic
companies,” said Ankur Bisen, an analyst who leads the retail division at Technopak. “We have
to have a more nuanced approach to the onslaught of global corporations.”

Ashwani Mahajan, a leader of the Swadeshi Jagran Manch, an economic self-reliance

“I know my next-door shopkeeper,” Mr. Mahajan said, echoing arguments heard in the United
States when Walmart was battling Main Street retailers. “I know his family. I don’t know who is
Amazon, who is Flipkart. For the survival of these two entities, I can’t put the livelihood of my
country at risk.”

Snapdeal, an Indian online marketplace that was hurt by earlier price wars with Amazon and
Flipkart, also cheered the policy changes while urging the government not to grant the
companies more time to comply.
Indian consumers may pay a price for such protectionism. A survey of common products
currently available on Amazon’s Indian site suggests that after sales by its affiliated companies
are banned, many products will disappear and others will become more expensive because
they will only be sold by small merchants who lack the clout to negotiate low wholesale prices
from manufacturers.

The policy changes prompted complaints from American business groups and diplomats, but
the government has shown no sign of relenting.

Senior officials of the commerce ministry, which issued the new rules, did not respond to
several requests for comment. In recent days, they have been bombarded with thousands of
emails and, in some cases, videos from small merchants urging them to take a tough line with
the foreign companies.

In a letter sent on Wednesday, the main traders’ organization threatened the government with
political repercussions if it backtracked on the policy and urged officials to investigate the past
two years’ of transactions made by Amazon and Flipkart.

Mr. Bisen of Technopak predicted that the government would not enforce the rules aggressively
for a few months, giving Amazon and Walmart time to figure out how to work within the new
system. Instead of selling products, he said, they could charge fees for listing items, storing
goods and delivering them.

“This entire arrangement will force these guys to be service providers,” Mr. Bisen said.

Source - https://www.nytimes.com/2019/01/30/technology/amazon-walmart-flipkart-
india.html

Why India is greeting Amazon's Jeff Bezos with protests

By Soutik Biswas

The last time Amazon boss Jeff Bezos was here, he wore a long Indian coat, climbed into a
gaudily decorated truck, posed for pictures and promised to invest a couple of billion dollars.
He also gave dozens of media interviews. "You hear all the time that there are so many
obstacles in doing business in India, but that's not our experience," he told a newspaper.

Five years on, the world's richest man has arrived on a two-day visit to a much less enthusiastic
reception.

A union of small traders who claim to represent tens of millions of brick-and-mortar businesses
have planned protests in 300 cities against Mr Bezos, accusing his firm of predatory pricing.
They complain that the online giant's now six-year-old retail operation in the country is hurting
them badly. Praveen Khandelwal of the Confederation of All India Traders, which is organising
the protests, says Amazon's "sinister game and evil designs" have "already destroyed the
business of tens of thousands of small traders" in India.
If this was not enough, hours before Mr Bezos's arrival, India's anti-trust regulator opened a
formal investigation into the business practices of Amazon and its Indian competitor Flipkart, an
Indian e-retailer, mostly owned by Walmart.

The regulator says it is looking into allegations of predatory pricing, the exclusive launch of
mobile phones, deep discounting and preferential treatment of selected sellers by the online
giants, among other things. Amazon said in a statement it would co-operate, address the
allegations and was "confident in our compliance [with local rules]".Traders says Amazon is
hurting small businesses. Amazon claims to have done a lot to empower retailers in India, its
fastest-growing market.

With more than 60,000 employees and $5bn of investment in the country, the Seattle-based
giant says it works with more than half a million sellers on the market place. (Under Indian laws,
the site can only sell third-party goods from independent sellers.) More than half of the sellers
come from small towns and cities, and many have grown rich during the site's popular festival
sales, the firm claims.

Amazon also partners with small, so-called mom-and-pop stores to help customers buy
products from the site for a commission. Some 50,000 Indian sellers have shipped $1bn worth
of goods to destinations outside India, under a programme that enables them to list and sell
their products around the world, the company claims.

On Tuesday, Mr Bezos announced that Amazon would aim to export goods worth $10bn from
India by 2025. He also promised to invest $1bn in digitising small and medium businesses here.
Mr Bezos is attending a company event in Delhi to fete small and medium businesses who
partner with his firm. These initiatives do not appear to impress the protesters. "Mr Bezos is
creating a false narrative of empowering small retailers," Mr Khandelwal says.

Amazon and Flipkart overwhelmingly dominate India's $39bn online retail market. Fuelled by an
explosion of mobile phone subscribers - more than a billion already - and cheap data, it is the
fastest growing e-commerce market and is expected to grow to $120bn in 2020. E-commerce
attracted 124 rounds of international investor funding in 2017 alone. There are now more than
4,700 such start-ups in India.

But India is also a country where neighbourhood stores thrive.

These nifty stores - called kirana or neighbourhood corner shops - continue to rule the brick-
and-mortar retail space. According to consulting firm PricewaterhouseCoopers, there are 12
million such stores in India and an increasing number of them are adopting technology -
accepting debit and credit cards and wallet payments, for example - to serve customers better.
Researchers at the Indian School of Business who analysed more than a million sales
transactions of a fast-moving consumer goods company in India with corner shops and
organised retail for three years found that the mom-and-pop stores had a higher ability to earn a
profit than modern trade outlets.

Amazon is no stranger to battling regulators around the world. Last year EU anti-trust regulators
opened an investigation after allegations that Amazon misuses "sensitive data" from
independent retailers who sell on the online giant's website. The retailers' relationships with
sellers of third-party goods is also being investigated in the US and Europe.

India is a promising, but tricky market. On the one hand, India's small traders are often seen as
resistant to change and protectionist in nature. They also receive the backing of populist
political parties.

On the other hand, there are genuine fears about the future of small brick-and-mortar
businesses which face the onslaught of online giants. Consumers are largely happy with the
speedy delivery and low prices that the e-commerce giants offer. And the government needs
foreign investment to grow a slowing economy. How the regulator and Mr Bezos negotiate the
maze will be interesting to see.

Source - https://www.bbc.com/news/world-asia-india-51117315