Amazon may cut costs abroad with delivery lessons from India

E-commerce giant Amazon.com is taking lessons learnt from its daily battles with India’s choked roads and cramped cities to some of its largest developed markets, exporting a model of cheaper deliveries and reduced warehousing costs.

Like its competitors Flipkart and Snapdeal, Amazon has struggled with deliveries in cities where snarl-ups are frequent and road signs unreliable. In response, firms have set up logistics networks and use motorbikes instead of trucks. Flipkart, for one, has tapped Mumbai’s dabbawalas, a more than a century-old lunch box distribution service.

More than two years on from its arrival in India, Amazon says it is now ready to apply some of the innovations applied here to markets including the US, Mexico and Brazil.

Britain, for example, could get a delivery service called Easy Ship, where orders are picked up by Amazon’s crew directly from sellers, cutting out the time and cost of sending goods to a warehouse and the need for more space.

Another service, Seller Flex, allows sellers to have the flexibility to store goods and ship them to buyers on their own, instead of routing them through Amazon. The company provides technology and training to ensure goods are packed, labelled and delivered as the company would.

“It’s not just that we learn from big brothers like North America,” Akhil Saxena, director of operations at Amazon India. “There is much focus on India and the kind of growth that is happening here... let’s see what we can learn.”

E-commerce in India could grow to $137 billion by 2020 from $11 billion in 2013, according to Morgan Stanley.

Speedy and cheap delivery is critical to winning over customers in a cut-throat industry, where heavy discounts mean firms are already burning through substantial cash to grow.

Harish Bijoor, an independent brand expert and business analyst, said the innovative delivery services were helping Amazon extend its reach in India, even at the cost of giving up some control over logistics — a lesson it could export.

While Amazon in developed markets may not want to tweak its model for best-selling goods, analysts said, it could consider the made-in-India seller solution to cut down on warehousing and delivery costs for thousands of “non core” products which are offered, but infrequently bought.

“Amazon is becoming a lot more flexible about how it services its customers,” said Neil Saunders, at UK-based retail research firm Conlumino.