Ama­ in big drive to push sales in In­dia

Weekend Argus (Saturday Edition) - - BUSINESS -

BAN­GA­LORE: Free ship­ping on a 100 ru­pee ( R16) book. De­liv­ery times guar­an­teed to the minute.

Th­ese are some of the in­cen­tives the world’s big­gest online re­tailer Ama­ is us­ing to en­tice In­di­ans to shop on the web, a sec­tor where growth has been sti­fled by pay­ment prob­lems, low in­ter­net us­age and a chal­leng­ing lo­gis­tics en­vi­ron­ment.

Ama­zon’s in­vestors are count­ing on its in­ter­na­tional busi­ness and ex­pan­sion to help drive growth and sup­port its $165 bil­lion mar­ket value, one of the high­est among US firms.

In­dia is Ama­zon’s third emerg­ing mar­ket in­vest­ment af­ter Brazil and China, and one vice- pres­i­dent and coun­try man­ager Amit Agarwal said would take time to pay off.

Most In­di­ans do not own a credit card, and less than half of the 152 mil­lion in­ter­net users have shopped online.

Then there are prob­lems like In­dia’s bad roads, the snarled bu­reau­cracy and the petty bribery that greases busi­ness.

The po­ten­tial, how­ever, is vast.

Online re­tail sales in In­dia were fore­cast to grow more than a hun­dred-fold to $76bn by 2021, from just $600 mil­lion at the end of 2012, re­tail con­sul­tants Technopak said.

E- tail sales in China, by com­par­i­son, are ex­pected to grow to $650bn by 2020 from about $200bn in 2012, con­sul­tants McKin­sey pre­dict.

“A lot of in­ven­tion is re­quired to cap­ture the po­ten­tial of this mar­ket and our fo­cus is to build this,” said Agarwal, who re­turned to In­dia to head Ama­zon’s busi­ness af­ter 14 years with the com­pany in the US.

“We are go­ing through a lot of trial and er­ror to fix prob­lems on the ground,” he said at Ama­zon’s In­dia of­fice in the tech­nol­ogy hub of Ban­ga­lore.

In­di­ans, on av­er­age, spend be­tween $ 24 and $ 35 on an online trans­ac­tion, a fig­ure dwarfed by the $150 to $160 spent by US shop­pers online for a trans­ac­tion, ac­cord­ing to data from US-based an­a­lysts comS­core and Re­tail De­ci­sions.

Agarwal spent two years ad­vis­ing Ama­zon’s founder, Jeff Be­zos, at the com­pany’s Seat­tle head­quar­ters, and be­lieves Ama­zon’s long-term strat­egy will work in In­dia as it did in the US, where the com- pany ran up losses for years.

“Right now we are fo­cused on giv­ing cus­tomers great ser­vice and mak­ing sure they shop more,” he added, sit­ting be­hind a large desk that he brought back with him from Seat­tle.

Ama­zon’s big­gest lo­cal ri­val is Flip­kart, set up by two exA­ma­zon em­ploy­ees in 2007 and which has yet to turn a profit.

Since July, Flip­kart has raised $360m from in­vestors that in­clude South Africa’s Naspers.

It said it aims to have $1bn in sales by 2015.

Agarwal would not give any fore­casts or fig­ures, but said Ama­zon’s in­vest­ments in In­dia had a seven to 10-year hori­zon.

He said Ama­zon was build­ing its own lo­gis­tics net­work, which it could lever­age when the rules changed and it could sell di­rectly to con­sumers.

In­dian reg­u­la­tions now pre­vent in­ter­na­tional e- tailers from mak­ing di­rect sales. – Reuters

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