Amazon Bets Big on India’s Busiest Shopping Season
When Jeff Bezos donned a bandhgala coat two years ago and posed for photographs in India, he wasn’t just promoting Amazon.com Inc.’s year-old business in the country. The web retailer’s chief executive officer was also putting his reputation on the line to break into the emerging e-commerce market.
Now, with 80 million products for sale, 120,000 -plus merchants and more than two dozen warehouses, Bezos’s protg Amit Agarwal is aiming to attain Amazon the country’s top online store by sales ahead of the Diwali shopping season. Known as the “festival of illuminates, ” the run-up to the celebration is India’s biggest retail event, when consumers buy everything from clothes and electronics to jewelry and vehicles. Indian will expend as much as $1.7 billion online during Diwali this year, according to RedSeer Consulting.
Flipkart Ltd ., India’s top web retailer, and local challenger Snapdeal, are well aware that they’re facing a critical exam this year amid Amazon’s onslaught. All three are flooding newspapers, billboards and TV depicts with ads and are offering discounts for Diwali, which now induces up a third of annual e-commerce sales. At stake is the future of India’s online shopping market, as well as Amazon’s global expansion plans, which had faltered after it failed to subdue China.
“This season could choose who’ll be the ultimate win, ” said Haresh Chawla, a Mumbai-based partner at private equity firm India Value Fund Advisors and an angel investor. “The loser will get unnerved and the victor can build internal confidence and rally the troops for “the worlds biggest” game.”
Reaching consumers in India has never been easyjust ask Unilever NV or Procter& Gamble Co ., which expended decades making inroads into the market. There are 22 official languages, and intake habits differ from place to place. On top of that, there are supply chain inefficiencies, high real estate expenses, lack of skilled workers, along with poor infrastructure and labyrinthine regulations.
Even so, the prospect of becoming the main web store in a country of 1.25 billion people who are just learning how to shop online is tantalizing. RedSeer Consultancy Pvt. is forecast that annual online sales will be $80 billion to $100 billion by 2020 from the current estimation of about $13 billion.
“Barely 2 percent of the population shops online, ” said Mrigank Gutgutia, who covers consumer internet tendencies at the Bangalore-based researcher. “It is still only the tip of the India e-commerce iceberg.”
Merrill Lynch is forecast that Amazon may sell as much as $81 billion in merchandise by 2025, up from $3.7 billion last year. Becoming India’s top web retailer would be a vindication for Amazon. In China, the only other market with more than a billion people, the company has little to show after a dozen years, thanks to the dominance of Alibaba Group Holding Ltd. and other local web retailers.
“The biggest possibility and the biggest challenges are both in India, ” said Agarwal, chief of Amazon India. “It’s going to be a great Diwali.”
After graduating from Stanford University, the 42 -year-old spent part of his career at Amazon’s Seattle headquarters as Bezos’s technical shadow, a coveted posture at the company that grooms future leaders by devoting them a front-row view of how the business is run.
To expand inventory, Amazon has been recruiting sellers at breakneck velocity. The web retailer has deployed an army of white-and-orange Chai Carts with emissaries who teach sellers how to list inventory and handle returns over beakers of milky chai tea. Another service, called Feet-on-Street, sends people on motorbikes to help merchants photo and market their wares.
Another big task will be moving beyond India’s eight big urban areas and into smaller towns and cities. “There could be a protest on the street, potholes on the road, labor challenges, warehouses in different regions with varied rules, goods trucks passing through state checkpointsand after all this, the package still has to arrive at the customers doorstep overnight if not within hours, ” Agarwal said.
One key goal for Amazonits tagline for Diwali is tyohar bade diwala ( the festival with a big heart) is to enticement dormant shoppers and first-time buyers. There are important trends working in Amazon’s favor. Exploding smartphone use offers the promise of bringing online commerce to hundreds of millions of buyers and sellers.
All of these efforts in India cost money; in June, Amazon said it will expend an additional$ 3 billion in India on top of an already allocated$ 2 billion. “An open funding tap could help Amazon offer discounts and hemorrhage out some of its contenders, ” said RedSeer’s Gutgutia.
For Flipkart and Snapdeal, the upcoming Diwali season will determine their ability to stay in the game. For smaller e-commerce startups, survival is at stake. Many, like AskmeBazaarwhich advertised aggressively during Diwali last yearshut down before they could make it to this one.
Flipkart, the current market leader with more than 100 million registered users, is getting ready. Amazon’s top challenger in India is in advanced discussions with Wal-Mart Store Inc. to sell a minority stake to the U.S. retailer for as much as$ 1 billion. The Indian web retailer is adding 10,000 temp workers to handle last-mile logistics, and is offering financing plans to set expensive purchases within customers’ reach. Flipkart’s tagline this year is ab itne me itnaaa milega : now you’ll get so much for so little.
Delhi-based Snapdeal, whose backers include Alibaba and Softbank Group Corp ., re-branded itself ahead of the shopping season, with a red box logo( its pitching: unbox zindagi , or unbox life ).
Consumers like Nivedita Raju, are already noticing certain differences. The Bangalore-based government official, who buys DVDs, herbs and knickknacks online, said that when she was looking for a computer title that was out-of-stock on Amazon, the web retailer had it printed and dispatched within 10 days.
“Its a very different level of customer service than Indian have been used to, ” she said.