arots “Therise and rise of Amazon - Pret View -Liverint live Print Close The rise and rise of Amazon After a late startin India, Amazon has grown at a scorching pace to eatch up with local rivals Flipkart and Snapdeal in the rave to the top of the world’s las big e-commerce market Bengaluru: Every week, Amazon India country head Amit Agarwal {and his senior leadership team get into a room al the company's headquarters in Bengaluru to discuss the previous week's performance. The mesting starts off with a customer call, what ‘Amazon calls, "the voice of the customer’ Things usually get ugly. Indian customers are extremely demanding and they aren't exaclly shy of voicing their opinion, especialy when they are displeased, “You can see people bristling, recoiling in their chairs because the customer is going on and on about how the service was bad. Itsels the tone for what the meeting is about, I get a lot of customer emails Imyselfand then Lalso get customer emails forwarded by Jeff (Bez0s, ounder-chief executive officer of Amazon.com Ine.) getso much ‘email that can predict reading through the email what the customer issue is. Then, Iknow ifthe issue is being worked on or not. there's ‘anew pattern emerging, pass it on to my team,” Agarwal sald in an interview, Its obsossion with pleasing customers, expressed through ‘Amazon's often repeated mantra and operating principles of widest product selection, lowest prices and fastest product delivery, has pald off handsomely for the company in India Photo: Reuters This obsossion wit pleasing customers, expressed through Amazon's often repeated mantra ond operating principles of widest product selection, lowes prices and fastest product delivery, has paid of handsomely forthe company in India, Though exact market share numbers are unavailable, by all accounts, Amazon is neck-and-neck with vals Fipkart and Snapdeal inthe ongoing race athe top of India’s e-commerce marke hats expected to grow o $60 blion by 2020 fom $448 billion in 2014, according to UBS AG. Thatisa staggering achievement Rapid growth Amazon launched in India only in June 2013, years after Flipkart (2007) and Snapdeal (2010). For a majority of Amazon's existence in India, bot Fipkart and Snapdes! have ben very wll fnded. n ack, in 2015, when much of Amazon's growth came atthe expense of Fipkan and Snapdeal, tne bankbalances at the two local companies were at ner peak The two local companies had also built expensively assembled senior leadership teams that were to take them to the next level of growth and keep Amazon at bay. They boast a bunch of big investors—Tiger Global, DST Global, T Rowe Price, Qatar Investment Authority and others at Fipkart and SofBank Group, Alibaba Group, Foxconn and eBay Inc. a Snapdeal—that together have more firepower than even Amazon. Forall that, Flipkart and Snapdeal are face with he strong possibilty that they may be overtaken by Amazon this year. Mint had fstreported on 18 August 2015 that Amazon India was gaining significant market share from Flipkartand Snapdeal Atthat ime, the two local companies were sill comfortably ahead of Amazon. Since then, Amazon's market share gains have accelerated, Splurging cash ip hvu lvemint com/Companias2s1 JgXLNTV7ML2tcESoRLTho-rise-andise-f-Amazon fit facek=rin 1“arots “Therise and rise of Amazon - Pret View -Liverint Consider this. Amazon generated more sales in October-December last year thanit did in all of 2014. Amazon's gross sales, net of discounts ‘and product retums, jumped 250%. In the January quarter, its volumes or number of shipments grew 150%, Snapdeal reported growth of 90% in gross sales, including discounts and product retuns, for te year ended March, and its growth cratered in the second half ofthe year Flipkars monthly sales have remained stagnant since November, Mintreported on 14 April, Flipkart declines to disclose its numbers, but saysit's seen “healtny sales grow’ Snapdeal denies losing market shave. "We have seen rapid growth, year-on-year, followed by a doubling of business on a much larger base. This is an indicator of the pace at which we are growing. Our shipment volumes have grown rapidly, and in the period Jan-Mar 2016, the shipment volume was 1.96 times of the volume in the same perio last year, Not only volume, but our share of shipments has also grown,” a Snapdeal spokeswoman said, Flipkar, to, claims ithasn'tlost market share and said itcontrols about 60% of mobile commerce in India and dominates categories such as smariphones and fashion, Snapdeal had set target of overtaking Fipkartin terms of gross sales by March this year, but the company failed to achieve that target, Mint reported on 29 April ‘Amazon has the biggest online store by far among the three, The firm offers more than 55 million products from more than 85,000 sellers. In comparison, Fipkart offers more than 40 milion products from more than 80,000 sellers, while Snapdeal offers more than 36 million products from 300,000 sellers The US-based online retaller also owns 21 warehouses across the counity and has provided technology tools and processes for 50 others ‘owned by is sellers, In comparison, Fipkart owns 17 while Snapdeal doesn't own any. “Three years ago, fanyone had told us that this is where we are going to be, we would have been very, very surprised in the sense that we have been able to get customer adoption and traction much faster than we imagined, We knew it was a big market and we have a long-term outlook, but we didn’timagine we would get so big so quickly,” Agarwal said Last month, Amazon's Bezos promoted Agarwal into his senior leadership team, in recognition of how fast Amazon has grown in India under Agarwal ‘Amazon's rise in India has been fuelled by an extraordinary splurge of cash In February, Amazon Seller Services Put. Ltd (Amazon India) nearly doubled its authorized capital to “16,000 crore, exceeding its massive capital commitment of $2 billion made in July 2014 and indicating the company's intent o splash whatever cash is needed to become the counity’s largest e-commerce firm. Amazon India’s authorized capital was “1,500 crore in July 2014, when Bezos promised itwill invest as ‘much as $2 billion in India over the next few years. Since Bezos committed $2 billion, Amazon Seller Services has already received roughly 10,730 crore to splurge on discounts, advertising, hiring and other things, documents with the registrar of companies show. This is apart from the company's cash infusions in its logistics unit ‘Amazon Transportation Services Pvt.Ltd and Clouatal India Pvt. Ld, the largest seller on its platform, ‘Whatever it takes’ “We've never been constrained by an investment cheque. The moment you drive actions on the basis of a number, you will nt do whatis Fight or the long term. Our long-term ambition isto transform how India buys and sells. To do that, we will thoughtfully invest whatever it takes. to do that’ Agarwal sai, What has led to Amazon's rise in India? Par of ithas to do withthe fact that Flipkart and Snapdeal lost the initiative last year. Fipkart was trying to undertake three complex shits in its business model last year: move from retail o marketplace; become a mobile app-only platform; and build a large advertising business. These three shifts caused the company to be distracted even asi cleared outils old management team and replaced itwith a new set ofleaders, which wasn’t wel received by its mid-level managers and others in the organization ‘Snapdeal, on the other hand, was always likely to suffer in comparison with Amazon's high-quallly customer service, party because unlike Flipkart and Amazon, the company doesn't operate ils own logistics service. That's why Snapdealis investing aggressively in e-commerce logistics frm GoJavas and working more closely with itto improve its delivery tme speed and consistency. Going local Butapatfrom the mistakes made by Flipkart and Snapdeal, Amazon has done a lotof things ight. ip hvu lvemint com/Companias2s1 JgXLNTVIML2tcESoRLTho-rse-andise-f-Amazon Hil facek=rin 24arots “Therise and rise of Amazon - Pret View -Liverint From ts launch, Amazon has customized its offerings to suitthe tastes and habits of Indian customers: offering cash-on-delivery, the preferred mode of payment in India; cutting the size ofits mobile app to suit cheap smartphones that have low storage and litle computing power; redesigning its dally deals ofering: tying up with local partners such as India Post to reach far-off areas in the hinterland; investing in a large logistics network af is own to get products fast o customers. n the sellers side, too, Amazon worked hard towards educating wary local businessmen about online selling and equipping them with the sills and technology tools to improve their product quality and service levels. Because of India's foreign direct investment (FD!) rules, Amazon works as a marketplace in India, connecting buyers with third-party sellers fn its platform. Amazon launched successful initiatives such as Easy Ship, which provides logistics services to sellers; Seller Flex, under which Amazon helps sellers bring their warehousing practices to the levels acceptable to Amazon; and a bunch of seller awareness and training programmes. “In these three key things—in-stock selection, low prices and fast delivery—we were able to do India-specific things because we started with what the customer wants and then worked backwards o achieve that. We didn'ttake an Amazon madel and impose iton India,” Amazon's Agarwal said, Regulatory change ‘Amazon hasn't always played by its usual rulebook in Inca. Unlike in its other markets, Amazon started advertising way earlier in India. Cloudtallis another instance of Amazon pushing ahead more aggressively than analysis expected. In October 2015, Mint reported that Clouatal was the biggest seller on Amazon India's platform, generating at least 40% of the company’s sales in key product categories in some months. Cloudtailis dominantin electronics and fashion sales, two ofthe three largest categories for Amazon india, |n 2014, Amazon Asia and Infosys founder N.R. Narayana Murthy's Catamaran Ventures jointly formed Cloudtall India to sell tems such as books, phones and exclusive Amazon merchandise on Amazon in under the seller name, Cloudtsl, according to documents available with the Registrar of Companies (RoC) Cloudtal india is a flly-owned unitof Prione Business Services Pvt. Lid, the documents show. Prione, in turn is owned by Catamaran Management Services Put Ltd, the acting trustee of Hober Mallow Trust (51%), Amazon Asia Pacific Resources Pvt Lid (48%) and Amazon Eurasia Holdings (1%). Apart from owning Cloudtall, Prone also helps Amazon India sigh up and train sellers across the country The expansion of Cloudtall underlines how the world's largest online rotaler has used the loopholes in the law to continue to have a direct selling model in the county that bans e-commerce companies from selling goods direclly to shoppers. ‘Amazon has been coy about Cloudiall. Asked whether Cloustall accounted for a large and disproportionate part ofits business, Agarwal replied: “Idon't know about tatstatement. As I said, we have more than 85,000 sellers on our platform and these range from small fo large sellers. Pretty much every large seller that you're aware ofin Indias a seller on Amazon.” Clousltai's preponderance on Amazon is now under threat, In March, the government allowed 100% FDIin online retall of goods and services under the marketplace model but prohibited marketplaces ‘rom having one dominant seller, The rules cap tolal sales of one vendor at 25% and also banned marketplaces from affecting product prices, effectively outlawing discounts by marketplaces. Last month, Amazon's parent frm, Amazon.com Inc, discloses to the US stock markets regulator that the company owns an indirect minority stake in a third-party seller on Amazon India, ‘Amazon made this disclosure in its quarterly regulatory filing with the US Securities and Exchange Commission. Ih India, the government restricts te ownership of contal of Indian companies by foreign entites involved in online multi-brand retail vading activites. For wwvamazon in, we provide certain marketing lools and logistics services to third-party sellers to enable them to sell online and deliver to customers, and we hold an indirect minority interestin an entty thats a the-party seller on the wiww.amazon.in marketplace," the company stated ints fling. It didn't reveal the size of he stake itholds. Pricing strategy ip hwwrlvemint com/Companias2s1 JgXLNTV7ML2tcESoRLTho-rse-andise-f-Amazon Hil acek=rin a4arots “Therise and rise of Amazon - Pret View -Liverint ‘Amazon will have to find ways to shi sales away from Cloudtall and continue discounting or else itrisks losing the ground it gained last year though even Flipkart and, to a lesser extent, Snapdesl, are affected by the new FDI rues, All the three marketplaces have put on held planned sale events and accompanying ads in light of the new FDI rules, Mint reported on 28 Apri “One of the things thatis important to understand about pricing is that the core pricing strategy is sellers pricing their tems. We as a ‘marketplace don't price. The way we drive prices down is (by investing in infrastructure and removing ineficiencies inthe system)" Agarwal said “Occasionally we do promations on our platform which help not only consumers but also every offine seller thatis participating. When you're a marketplace and you're tying to drive awareness in a very nascent environment, you would have occasional promotions and events and ve will figure out what's the right, allowed method to do it. Our goal is always to be compliant with the laws," Agarwal sa. ‘Amazons desperate to succeed in India, the last big e-commerce market inthe world, after losing outin China to Alibaba Group Holding Lig, Alibaba is an investor in two Amazon rivals, Snapdeal and Paytm, Alibaba is also expected to make @ direct entry in India's e-commerce business at some point probably through an acquisiton. Some analysts expect India's e-commerce will eventually end up being a batle between Amazon and Alibaba, either direcly or indirectly “Amazon has US, and Alibaba has China; India is the ast frontier for both,” said Harminder Sahni, managing director at Wazir Advisors, a consultancy. it's hard to predict, but, yes, there's a good liketihoed that Amazon and Alibaba will go head lo head. tall depends on how the economic situation in China unfolds, and also on how Flipkart does. If Flipkartis able to slay independent, then its a diferent scenario. Butif Flipkart cannot, tien India’s e-commerce market may just become a head-o-head between Amazon and Alibaba.” ip hvu lvemint com/Companias2s1 JgXLNTVIML2tcESoRLTho-rse-andise-f-Amazon Hil facek=rin 4s