Amazon: Betting Big on a Trillion Dollar Indian Market
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Case Code: BSTR490 Case Length: 12 Pages Period: 2013-2016 Pub Date: 2016 Teaching Note: Available |
Price: Rs.400 Organization: Amazon Industry: Indian Online Retail Market Countries: India Themes: Overseas Mergers & Acquisitions |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Indian Online Retail Market
The Indian online retail market was growing since 2009, fueled by favorable consumer demographics with a young tech-savvy population and rising income levels. A phenomenal growth in smartphones and the falling prices of 4G web access also contributed to the growth. Reports highlighted the fact that in 2015, young consumers in the age group of 15-35 years accounted for 75% of online sales, and 50% of online purchases were made using downloaded mobile apps....
Indian Consumers
The Indian online market presented unique issues to companies. Cash-on-delivery (COD) was the most common mode of payment in India for online purchases. The Indian consumer psyche did not approve of online payment. Consumers expected to see the product before purchasing it. Also, they were concerned about the security of online payment. Online retailers worked with the COD payment system as it increased the number of transactions and first time customers rapidly. However, it was a riskier payment option than online money transfer. Online retailers had to invest their money in advance for fulfillment....
The Competitive Arena
The online product categories and quantity ordered were rising in India. The rate of growth of online sales was the fastest in the world. India's online retail grew by almost three times from $4.5 billion in 2014 to $12 billion in 2015. The competition in the Indian online retail market was very intense. Analysts said no battle was more intense than the fight for the Indian online market share. In early 2015, Flipkart, Snapdeal, and Amazon were the top three contenders in the online retail segment. Flipkart and Snapdeal had 44 per cent and 32 per cent of the market share respectively, while Amazon India had captured 15 per cent. The remaining 9% had been taken by other players....
Flipkart
Flipkart was the leader in the Indian online retail business in terms of sales of Gross Merchandise Value (GMV 3 ). It began its operations in October 2007 in the southern Indian city of Bengaluru. In its bid to provide a superior customer experience, it set up its 24/7 back-end customer services in 2008. It was one of the first to start the COD payment mode....
Snapdeal
Snapdeal was launched in February 2010 in New Delhi. It was ranked second in the Indian online retail business in terms of sales of GMV. Snapdeal's parent company was Jasper Infotech, which ran its online operations, as it provided an assortment of products. From its early days, Snapdeal had accomplished growth by way of strategic partnering. In the first year of its operations, it partnered with about 1000 sellers....
Amazon's India Strategy
Amazon began to pursuing pursue its plan to become the leader in the Indian online retail market by using a different business model than the one it followed in developed countries. It faced a few deficiencies in infrastructure and operational gridlocks in India. 34 Rather than let these limit its business in India, it revamped its previously used business model in other countries.....
Localization
Amazon localized its operations. It adapted itself to working on the cash on delivery payment mode, which was quite unlike the pre-paid online payment system in the company's global transactions.....
Last Mile Delivery
Amazon delivered its orders in India using delivery boys who used motorcycles and, during peak sales seasons used the three-wheeled auto-rickshaws. For last mile delivery in remote areas, Amazon partnered with the Indian Postal Service that had the largest reach in the world. It also partnered with Rural Distribution Centers that covered more than a hundred satellite towns and tier II cities. Amazon built about 4000 local shipment pickup and delivery points by partnering with small local grocery stores and petrol pumps.....
Increasing Customer Base
In early 2012, to cater to the price sensitive Indian consumers, Amazon launched Junglee.com: a platform for customers to compare prices. Within two years, in 2014, 100,000 offline and 2,000 online sellers were using Junglee.com. In 2015, Amazon launched marketing programs to build its customer base. It captured more customers by partnering with kirana dealers in Bengaluru. The marketing strategy was called 'Kirana 7 Now',....
Taking on India
At the end of 2015, Amazon had announced that it would invest another $ 5 billion in India and invested $ 565.53 million for the year 2015. In 2015, its losses were 1.5 times its sales – while sales were $157.23 million, losses were $ 265.23 million. Amazon's sales in 2015, however, went up by six times from $26 million the previous year. Agarwal said his company’s top priority was growth rather than earning profits. Amazon was helping more than 6,000 Indian businesses to sell ethnic apparel, home furnishings, and other goods and to increase their sales for a predetermined sales commission. 55 There was a 250% growth in its seller base in 2015.....
Exhibits
Exhibit I: A Comparison between Flipkart, Snapdeal, and Amazon India
Exhibit II: Flipkart's Acquisitions
Exhibit III: Snapdeal's Acquisitions
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