Amazon has spent half of the $5 billion committed by its founder Jeff Bezos in creating logistics, warehouses and technology infrastructure in India. The infrastructure and programmes to reach out to sellers and customers in remote parts has helped Amazon India get nearly two-thirds of its customers from smaller towns. “I think the maturity word doesn’t really make sense for an industry that’s so young. The kind of growth I’m talking about, if you plot this point of time on a graph for e-commerce over the next 10 years, you will not even see it, it’s that small,” Amit Agarwal, vice-president and country manager of Amazon India, told Business Standard in an interview.
Edited excerpts:
How have the four years been in India?
We can say choice, convenience, access, partnering with existing ecosystems, and loyalty are five big contributions from Amazon that have changed e-commerce in India. It has made it what e-commerce should be. In the absence of this, e-commerce would be an urban-only, high average selling price, discount-led and a once-in-a-year phenomenon. In my opinion, if this had remained the case, all the investment going in the sector would be completely a waste of money. In the last four years, we have directly created 150,000 jobs. This does not even count the sellers and indirect jobs that we have generated. This has given a good recipe on how India could use e-commerce to solve one of its core promises, which is job creation.
How will the next phase of growth be?
No matter what time period we are in, we strongly believe there are three things that matter — which is selection, great value and convenience. It is not going to change. We will continue to add selections and make them available in stock. Today, 2.4 million of the 100 million products that we sell are in fulfilment centres, which get shipped as soon as you order and we guarantee delivery. It pales when you compare with Amazon.com. We have so much ground to cover, we have 100 million, they have billion products.
A lot of spending would be on infrastructure and technology because we need to build solutions to manage all this stuff. The piece about India is that while three important things of selection, greater value and convenience are similar across the world, India will have discontinuities that will require you to innovate. The solution that works for the first 100 does not work for the 100 million because the disposable income will cliff down, or remoteness will go up, or the internet speed will go down. So the homogeneity that exists in developed economies doesn't exist in India. So our focus is to work on those discontinuities and innovate.
Will Amazon India need a bigger cheque from its headquarters to keep up growth?
We don’t really hold ourselves back based on a targeted investment. We will require a lot of investment as will Indian e-commerce. It is still very early and we should be ready to invest for many years. We will require infrastructure, innovations and much more if we want to serve hundreds of millions of customers and, from that perspective, we are not going to hold ourselves back based on an announced number.
Will the pace of investment remain the same or grow?
It will be whatever it needs to be to serve the opportunities that we are looking at. We are not going to be foolish about it, but neither are we going to hold ourselves back. It will all be determined by what we are planning on doing and if that truly moves the needle.
E-commerce, over the last few years, has shown high double-digit growth, but now that companies are maturing and reducing discounts, will we see more realistic growth?
We are still seeing those numbers, maybe it’s a different story elsewhere. Our first-quarter growth was 85 per cent year-over-year and we are not really seeing any slowdown. I think the maturity word doesn’t really make sense for an industry that’s so young. The kind of growth I’m talking about, if you plot this point of time on a graph for e-commerce over the next 10 years, you will not even see it, it’s that small. The reason I think we’re still growing at this pace is customers are shopping more, Prime members are spending more, new customers continue to come to us. Amazon.com, at its current scale, is still growing at 30 per cent plus, and the US market is 100 times bigger than India. Here, it’s so early that I foresee double-digit growth for many more years to come.
How is Prime shaping up in India and who are the customers opting in?
I think a Prime customer is one who naturally shops more. You’d probably do this mathematics in your head, that if I have to pay Rs 499 a year and shipping cost is Rs 40 per delivery, I should shop around 10-12 times to make it worth. Indian consumers are so good that doing that calculation. We see that when they join Prime, the number of times they shop with us goes up by multiple times. Once they signup, they want to get more out of it and we’re seeing that ratio of purchases is as good, if not better than what we see in other geographies. One out of three items shipped everyday are orders placed by Prime members, so it’s a pretty sizeable part of our business here.
A lot of your vendors are concerned with the GST rollout. What are they saying to you?
There’s still time for the GST rollout date. We are all hands on deck helping sellers out in many ways - from online webinars to offline training sessions, to helping them with account managers. We are seeing good traction so far but there’s still a half month so I think we will see momentum pick up as we get closer.
One report said half of e-commerce sellers are still not onboard on GST?
How much of your assignment did you do seven days or fourteen days before the deadline. This is just how people function and our job is to provide all the support for people to make that move. When you have 200,000 sellers, you will have a phased way of people coming in and getting on GST. We’re pretty confident that we’ll get it done before the date.
E-commerce companies are saying that smaller sellers will get hurt, the guys with turnover below Rs 20 lakh turnover.
What’s Amazon’s view on that?
We keep sharing our views with the council and we did that as an industry and we pointed out that tax collection at source are things that might add friction. If we keep poking into what at this point of could be better, we’re forgetting how transformational a law GST is. It does a lot of things very well and a lot of things will stabilise.