Amazon.in gives users
access to sellers of books, movies and TV shows. The company will be increasing
the range available, with cameras and mobile phones due next. This is the 10th
country-specific site that Amazon has
globally, apart from the main US one. For now, owing to foreign direct
investment (FDI) regulations, the company has to follow the marketplace model,
where they are not directly selling any of the products on the site, but are
handling logistics for the sellers, with their “Fulfilled by Amazon” model. The
marketplace makes about 40 per cent of Amazon's revenues globally and, on
Wednesday, Amazon said it is starting with a modest 100 retailers in India.
Amazon has three pillars it is basing its strategy on, according to Amit
Agarwal, Vice President and Country Manager, Amazon India: a vast selection,
low prices, and fast delivery to customers. The other part of the strategy is
to build a highly customer centric model. A buyer can come and chose the
seller, and chose the best deal.
For sellers, Amazon is offering two options right now. One
is selling on Amazon; there, the listing and payment is on Amazon, but
logistics are handled by the seller. The second is fulfilment by Amazon, where
Amazon also handles the deliveries. Sellers pay a monthly subscription fee for
the merchant, along with a referral fee for successful transactions. However,
for the first year, the company is offering a free subscription, and a
discounted referral fee of 5%, instead of the normal 12% fee. Fulfilment by
Amazon is optional, but a quick look at the site shows that a majority of
sellers are using the service. But finally, to sell on the
Amazon Marketplace: the seller will have to bear a monthly subscription fee of
Rs 499, currently set free for a year's promotion; a transaction fee of 12 per
cent of the item value (set at a promotional 5 per cent); and a closing fee of
Rs 10 on every sale. Amazon is a platform, where retailers, shop owners or
publishers can sell their titles - at times with help from an Amazon warehouse
and logistics managed by Amazon.
For buyers, too, there is a launch window where there are no
delivery charges, and no cash on delivery charges. Amit
Agarwal, vice-president and country manager, Amazon India said that the
timeline for this decision isn’t fixed, and added, “We’re watching the consumer
feedback. We’ve made the whole thing very transparent, and we won’t charge for
things overnight. It’s going to be something we do base on what the customers
are saying.” Agarwal also confirmed that the sellers can’t add their offerings
directly yet, and said, “We look at the selection, scale and speed that the
companies can offer, and help them to make the most of the system.”
Some believe that the
entry of Amazon is going to have a negative impact on companies such as
Flipkart, which, on 4 June, reached a milestone of selling 100,000 books in a
single day. Flipkart also follows a marketplace model, but Agarwal points out
that sellers don’t need to be exclusive to one platform, and will only use a
platform that gives them a competitive advantage. The marketplace model, which was
pioneered by eBay, and is used by sites such as Flipkart, SnapDeal and Infibeam
today, is quickly gaining ground in Indian e-commerce—the move gives them
access to much more inventory than before, without significant investment.
At the same time, Amazon’s other business in India, the
price comparison website Junglee.com will also continue to function. Agarwal
says, “In a way, Junglee is a map of the e-commerce space, and our goal is to
have Amazon.in show up on that map in a good position. Junglee served to
confirm and validate our views about India, about what the customer is looking
for. It’s also helped us to see a lot of sellers, who aren’t well known, but
are offering a great catalogue. They would make great candidates for Fulfilment
by Amazon, so in that way, we see Junglee as very complementary to what we’re
doing with Amazon.in.”
For Amazon India is a crucial market as it is expected to
grow at a good pace in the coming three to five years. Forrester
estimates that the Indian market will grow at a compounded growth rate faster
than any other country in the Asia-Pacific region to reach $8.8 billion in 2016
from the 2012 levels of US $1.6 billion. Amazon has also entered a
comparatively larger market created by Indian players like Flipkart, Jabong, Myntra and numerous others ( some of them
already shutdown) who were able to increase market share through strategies
like cash-on-delivery payments, liberal return policies, free or subsidized
shipping and in-house logistics. Amazon understood the importance of these
strategies and incorporated them in its business model along with its big strength
the Market Place model. Amazon has perfectly timed its entry into the Indian
market and this strategy has allowed it to use its strengths to maximum
advantage.
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