marketing question and need the explanation and answer to help me learn.
Read the attached 3 articles. Prepare a 2 page written summary on the following questions for Amazon India.
Amazon wants India to shop online + Amazon to win in rural India + How Amazon adapted its business model (3)
What are the major challenges that Amazon faced in India?
How does the Indian market and consumer differ from those in the US?
What actions has Amazon taken to adapt its services and business model to the Indian market?
Who are Amazon’s major competitors in India, and what challenges does Amazon face from its established competitors?
What international marketing lessons can be learned from the Amazon experience in India?
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 1 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdAmazon Wants India to ShopOnline, and ItÕs Battling Walmartfor SupremacyThe prize is 1.3 billion customers.More stories by Brad StoneOctober 18, 2018, 4:00 AM EDTAmazon agents making deliveries in Kerala.Photographer: Mahesh Shantaram for Bloomberg BusinessweekBy and
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 2 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdSaritha RaiLike many neighborhood stores in India, the Sri Lakshmi VenkateshwaraKirana is tiny and cramped. Single-rupee shampoo packets and bags of potatochips hang from ceiling hooks, jars full of colorful candies and sesame brittlesit on the counter. Sacks of rice and lentils are stacked waist-high, occupyingnearly every square inch of the floor. It may not look like it has much to offerin the way of merchandise, but this kirana, in the southern village ofMadikere, sells practically everything.Last year the shopÕs 27-year-old owner, Gangadhar N., joined thousands ofother small Indian retailers in partnering with Amazon.com Inc. While cowsand roosters ramble outside on the dirt lane and women walk by with bales ofhay balanced on their heads, Gangadhar, who uses only a single letter as hislast name as is common in India, displays AmazonÕs selection to villagers on asmartphone and shows them how to find things and get the best prices. ÒIÕmthe person between Amazon and the people who shop online,Ó he saysproudly.Enlisting local shop owners to serve as envoys for online buying is part ofAmazonÕs foray into India, one of the last frontiers of e-commerce. India hasa population of 1.3 billion, hundreds of millions of whom now ownsmartphones and are just getting their first glimpse of the cornucopia ofconsumption thatÕs accessible online. Winning here is all the more importantafter Amazon bombed in another immense market, China.Reaching customers in India isnÕt easy. No country is more colorfully,anachronistically chaotic. Local roads are rutted with potholes and clutteredwith motorcycles, auto rickshaws, and stray dogs. Making deliveries requiresMad Max-level driving skills. Four out of five Indians earn wages in cash;credit cards are rare, and trust in transacting online has to be earned. A
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 3 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdquarter of the population lives in poverty, and a similar proportion isilliterate. Still, the countryÕs middle class is growing, which is why risk-tolerant retail giants want in.AmazonÕs goal is to Òtransform the way India buys and sells,Ó according to itslocal mission statement. Anodyne language aside, this is a massiveundertaking that, as usual with early-stage Jeff Bezos projects, is massivelyunprofitable. His company lost an estimated $3 billion on its internationalefforts last year, and analysts believe most of that was in India. Desperate tokeep up, Walmart Inc. in May spent $16 billion to acquire AmazonÕs primaryrival in India, the homegrown online retailer Flipkart Online Services Pvt.Alibaba Group Holding Ltd. is also here, with an investment in a popularonline retailer called Paytm E-commerce Pvt, as well as a stake in thecountryÕs largest online grocer, BigBasket. All this action is almost enough tomake Bezos, AmazonÕs founder and the wealthiest man in the world, ahousehold name in one of its remotest places. Almost. ÒI donÕt know who JeffBezos is,Ó says Gangadhar, standing outside his kirana, under an awning forshade. ÒBut if heÕs made it convenient to shop from this village, he ought to bethe richest.Ó
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 4 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdFeatured in Bloomberg Businessweek, Oct. 22, 2018. Subscribe now.Photographer: Mahesh Shantaram for Bloomberg BusinessweekOn the first day of each month, Gangadhar distributes leaflets around hisvillage listing AmazonÕs deals on exotic global brands such as Pampers,Gillette razors, Olay moisturizer, and Pillsbury cake mix. ÒDonÕt be scared ofonline shopping, make friends with it,Ó the handout counsels.When his customers order by noon, Amazon delivers packages to the store
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 5 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdthe next day via a logistics company called StoreKing. When packages arrive,as a small box addressed to a tea shop owner named Appaji did on a recentafternoon, Gangadhar leaves his wife at the store to make deliveries on foot.He grew up in the village and knows almost everyone by name.GangadharÕs deliveries can have the feel of a parade, with other villagerstrailing him on his errands. When the procession reaches AppajiÕs tea shop,where a half-dozen older men squat in darkness on floor mats sipping fromsmall cups, the proprietor says the package is for his daughter, andGangadhar and his entourage continue on to the Appaji home nearby.There, in a windowless living room, where a ceiling fan whirs and a small TVblasts news and commercials in the local language, Akshatha, 17, receives theAmazon box with trembling hands and opens it. ItÕs a Moto G 5s, her firstsmartphone, which cost around $130. ItÕs a significant purchase for the shopowner, who sells cups of tea for 4 rupees (about 5¢) and who pays the kiranaowner in cash. Later, Akshatha reports that she signed up for WhatsApp,shared selfies with friends, and became an aspiring Amazon customer. ÒI hearevery product shown on TV is available,Ó she says. ÒFor my birthday inDecember, IÕm already thinking what to ask my parents to gift me fromAmazon.Ó
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 6 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdCustomer Amirul Amin had ordered some items earlier and came to pick them up.Photographer: Mahesh Shantaram for Bloomberg BusinessweekAmazon opened its Indian website in June 2013. The group running the site,a team of Indian-born engineers who had worked at AmazonÕs headquartersin Seattle and were persuaded to return home, stored and shipped productsfrom a single, relatively small 140,000-square-foot warehouse in a crowdedsuburb outside Mumbai. Bezos told the team to Òthink like cowboys, who arewild and fast and a little bit rude, and not like computer scientists,Ó accordingto Amit Agarwal, head of the India operation. That translates as Òit was OK tomake mistakes. ItÕs important that you control your destiny and move fast,Ósays Agarwal, a former Bezos Òtechnical adviser,Ó Amazon lingo for anexecutive shadow. Agarwal speaks in the narrow lexicon of the companyÕs
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 7 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdpublic pronouncements, extolling the holy trinity of price, selection, andconvenience. HeÕs such an avowed Amazonian, in fact, that when the Indiadivision opened, he shipped his door deskÑa cherished symbol of frugality atAmazonÑhalfway across the world to his new office.About a year after the launch, Bezos visited for a grandiose public unveiling ofAmazonÕs investment plan. He insisted on presenting an oversize $2 billioncheck to Agarwal while riding an elephantÑa mystical symbol in India thatrepresents wisdom and strength. But all the elephants were occupied in aregional religious festival at the time, and colleagues had to persuade him toconduct the exchange atop a heavily decorated truck. ÒI think God takespriority over Jeff,Ó Agarwal says.Amazon now has more than 50 fulfillment centers in India. The main office,in Bengaluru (formerly Bangalore), is in a modern office tower ringed bysecurity checkpoints. In the lobby thereÕs little to mark the presence ofAmazon, save a small blue sign and three Fire tablets sitting on a receptiondesk. Upstairs, inspirational if unsettling Bezos quotations line the walls:ÒDay 2 is stasis followed by irrelevance, followed by excruciating, painfuldecline, followed by death.ÓAmazon followed a familiar playbook in India. Prime was introduced in 2016,offering two-day shipping everywhere in the country. Membership costs 999rupees, or around $14 a year, and members can watch free shows such as thestandup comedy competition series Comicstaan. As it has in other countries,the company introduced Pantry, with a selection of snack foods, beverages,and household items, and, in a handful of cities, Prime Now, offering freshfood and produce within two hours.But everything was harder in India. Amazon realized early on it couldnÕtdepend solely on such logistics partners as the India Post, the federal mail
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 8 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdcarrier. So it created its own network of couriers in vans, motorcycles, bikes,and even boats to reach the remotest parts of the country, such as the riverislands in eastern Assam. Like its rival Flipkart, Amazon accepts cash ondelivery, since few shoppers have access to credit cards. Customers have theoption to deposit change from a cash transaction as credit in their Amazonaccounts, one of the companyÕs many efforts to get people more comfortablewith the idea of digital payments.AmazonData: Compiled by BloombergOne of AmazonÕs biggest challenges has been simply getting Indianmerchants comfortable with selling online. Foreign retailers that sell multiplebrands are prohibited by law from selling anything other than food directly toconsumers, which means everything on the Amazon.in marketplace is listedby an independent seller. One way Amazon has gotten around this is to investin joint ventures with local businesses; another is to send employees intolocal markets with ample supplies of chai to introduce merchants to suchconcepts as email, apps, and e-commerce and persuade them to list theirproducts on Amazon. The company basically had to help teach all of Indiahow to buy and sell online. That meant advertising loudly on television andbillboards. (ÒAur Dikhao,Ó or Òshow me more,Ó was the slogan of a TVcampaign.) It also meant finding and enlisting intermediaries instead ofdoing away with them, AmazonÕs customary approach in other parts of theworld.In one initiative, Amazon turned 14,000 local shipping offices into e-commerce training centers, called Easy Stores, where counselors are availableto escort buyers through the virtual mall. Orders are delivered to the stores aday or two later, and buyers can pay cash when they pick them up.
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 9 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdAt an air-conditioned Easy Store in the Worli neighborhood of Mumbai,customers leave their shoes at the door and line up to shop with the help ofone of four agents sitting behind counters. ÒA sari for my mother, a lehengaskirt for my sister, sheets and blankets for the house,Ó says Hachnul Haque, a28-year-old migrant from northeast India, who works in a restaurant kitchenfor 25,000 rupees a month and is buying gifts for his annual journey home.Today heÕs looking for a bangle for his aunt. The agent browses Amazon.in ona PC, which is also mirrored on a screen in front of Haque, as Haque takesphotos of products with his phone and texts them over WhatsApp to his auntso she can pick the one she likes best. ÒIÕve known the people here over a yearand trust them,Ó he says, propping a leg up on a free chair. ÒThereÕs notension in shopping this way.Ó
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 10 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdContract workers perform stretching exercises as soon as they arrive for their shift at AmazonÕs new fulfillmentcenter in Attibele, near Bengaluru.Photographer: Mahesh Shantaram for Bloomberg BusinessweekA 45-minute drive from AmazonÕs inconspicuous offices through the gnarlyBengaluru traffic are the headquarters of Flipkart, a trio of low-slung towersin an office park thatÕs also home to the local branches of Xiaomi Corp. andWeWork Cos. Even on a recent national holiday, itÕs a hotbed of activity, withemployees preparing for ÒBig Billion Days,Ó an invented celebration likeAlibabaÕs Singles Day and AmazonÕs Prime Day. Big Billion Days kicks offDiwali, the Hindu festival of lights. ÒCongratulations Flipkart, we have set anew world record,Ó reads a giant sign in the lobby. It commemorates thecompanyÕs recent accomplishment of stacking 45 mattresses to demonstratethe durability of a Flipkart-branded bed frame.Ask an executive at either Amazon or Flipkart which oneÕs ahead, and youÕllreceive an indignant cavalcade of conflicting market share data. Both professnot to care about the competition while insisting that theyÕre winning. WhatÕssafe to say, though, is that Flipkart was first to bring modern e-commerce toIndia and is still slightly bigger, and that Bezos recognized that fact and atone point was determined to buy it.Flipkart was founded by two former Amazonians. When Amazon first openedan engineering center in Bengaluru in 2006, in a small office over a cardealership, one of the first employees was Sachin Bansal, a graduate ofDelhiÕs prestigious Indian Institute of Technology. A year later, Bansalbrought his high school friend Binny Bansal (no relation) into Amazon, and afew months later they quit to try to replicate BezosÕ original magic of sellingbooks in their native country.Even before they were competing against their former employer, the two hadtrouble escaping its shadow. ÒYou are just copycats! How is this anything
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 11 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createddifferent from Amazon?Ó Amar Nagaram recalls saying to Sachin Bansal in2011Ñduring NagaramÕs job interview at Flipkart. Amazingly, Nagaram gotthe job and is now a vice president there.Early on, Flipkart accepted cash payments from customers and begantraining Indian merchants in the particulars of e-commerce. To help deliverpackages in Mumbai, it enlisted the dabbawallas, couriers who make up acentury-old network that brings hot lunches in intricately color-coded boxesfrom workersÕ homes to their offices. Meanwhile, the company raised billionsfrom investors such as Tiger Global Management, the South Africaninvestment fund Naspers, and the Silicon Valley venture capital firm Accel.By the end of 2015, Flipkart was worth $15.5 billion and one of the mostvaluable startups in the world.In 2016, trouble hit. As Bezos continued to write large checks to AmazonIndia, Flipkart sales slowed, and the company had to lay off workers. Itaccepted a lower valuation of $11.6 billion when it raised an additional $1.4billion in April 2017 from a consortium that included Tencent, EBay, andMicrosoft. And because Flipkart was now majority-owned by foreign funds, itcould no longer sell products directly and had to adopt the marketplacemodel, where independent merchants list their products and make the sales.Like Amazon, Flipkart invested in affiliates to carry the most popularinventory. But the shift, executives say, sowed internal chaos and hurt theexperience for both buyers and sellers.By the end of 2017, business was improving. FlipkartÕs acquisition of Myntra,a successful fashion website that carries global brands and ethnic Indianclothes, created another popular category on the site alongside smartphones.Sachin and Binny Bansal had also recruited back their former chief financialofficer, an intense, fast-talking Tiger Global alum named KalyanKrishnamurthy, whoÕd worked at EBay Corp. in Asia a decade before and
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 12 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdlearned from its fatal lack of interest in tailoring its service to specific regionsin India. ÒThis is a place where you cannot have one strategy,Ó saysKrishnamurthy, who became FlipkartÕs CEO. ÒYou need to have 24 strategiesand maybe even more.ÓThen the suitors came calling. For the first six months of 2018, the Indianmedia intensely charted rumored talks between Flipkart and Walmart. Whatwas unknown at the time is that Flipkart executives had also started talking toBezos, according to two people familiar with the negotiations, and evenvisited the Amazon CEO at his Seattle home.With Peter Krawiec, his top M&A deputy, Bezos started working on a deal toacquire Flipkart. Members of WalmartÕs management team got wind of itwhen they happened to be in India taking a private Harvard Business Schoolexecutive education course about the country.Intoxicated with the potential of the Indian e-commerce market, the tworetail titans battled for the deal through last winter and spring, bidding upFlipkartÕs valuation from $11.6 billion to $20 billion. Amazon eventuallyoffered the higher bid, says someone who was privy to the negotiations, andat least one major Flipkart backer, SoftBank Group Corp.Õs Masayoshi Son,favored it. But while Bezos was confident he could get the deal approved byIndian regulators, some of FlipkartÕs investors feared the uncertainty of theantitrust approval process. Eager to cash out of a decade-old startup,FlipkartÕs board agreed to sell to Walmart. Walmart CEO Doug McMillonvisited India after the acquisition was announced and told Flipkartemployees, ÒIt is our intention to just empower you and let you run. Speedmatters. Decisiveness matters.Ó
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 13 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdA shop outside Bengaluru that serves as an Amazon distributor.Photographer: Mahesh Shantaram for Bloomberg BusinessweekAmazon.inÕs and FlipkartÕs customers are generally wealthy, speak English,and live in the most cosmopolitan Indian cities. Getting them to sign up andstart buying was hardÑbut not that hard. The real challenge for the twocompanies and for the future of e-commerce in India, executives at bothcompanies say, hinges on the next 100 million usersÑa portion of thepopulation that is less educated and speaks 1 of the countryÕs 22 majorlanguages at home.This fall, Amazon introduced a website and mobile app in Hindi. ItÕs not justa clumsy machine translation, executives contend. Images are prominently
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 14 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createddisplayed, and such words as ÒfreeÓ and Òmobile phoneÓ are so commonlyused in everyday conversation that theyÕre left in English. ÒThis was not agimmick,Ó says Agarwal. ÒThis is an intent translation that keeps in Englishwhat should be in English and translates into Hindi based on what ourcustomers really talk about.ÓOver at Flipkart, employees also stress the urgency of finding the next groupof users. ÒWe are rebooting ourselves here, and one of our biggest changes inmindset is that we no longer resemble our customers,Ó says Nagaram, thehead of user growth. Flipkart has sent researchers into towns and villages tostudy what people want and how they use their smartphones, while preparingversions of its service in five local languages. It also recently introduced2Gud, a mobile website targeting lower-income buyers that offers a selectionof used and refurbished consumer electronics and appliances.Another major front in the battle for customers is groceries, which make upabout half of the Indian retail pieÑand is a highly fragmented market even bylocal standards. Both companies are experimenting. In addition to deliveringgroceries in a few major cities, Amazon was recently part of a group thatacquired More, the fourth-largest grocery chain in the country, which hasaround 600 supermarkets. Flipkart has started a grocery delivery service inBengaluru. It also thinks it can learn a few things from WalmartÑthe biggestgrocer in the world.Looming over all this is the possibility that politics, not business tactics, coulddecide the battle for India. The government reviews its e-commerceguidelines every few years, including the rules that prevent foreign-ownedcompanies from holding and selling products to consumers. A draft of thenew rules, leaked over the summer, suggested that the guidelines could geteven tougher over the next year or so. They would limit Amazon, Flipkart, ortheir affiliates from holding any inventory at all. The new rules would
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 15 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdprobably yield an advantage to truly indigenous companies such as RelianceIndustries, a conglomerate thatÕs also one of IndiaÕs largest store owners.Owned by IndiaÕs richest man, Mukesh Ambani, Reliance declared thissummer that it will create a hybrid online-and-offline retail platform.Agarwal promises compliance with all local laws and says all the company cando is make the government see the advantages of letting the company sellgoods directly. ÒItÕs kind of wasting my time trying to think of things that IdonÕt control,Ó he says. But of course Amazon is lobbying hard in Delhi. Itspent $107 million on legal fees in India last year, according to public filings.At noon on a Saturday, SP Road, BengaluruÕs wholesale electronics market,feels desolate. In the tiny, mostly empty stores that pack the street, shopattendants arrange and rearrange their goods. As sales of smartphones and
10/22/18, 9:58 PMAmazon Wants India to Shop Online, and ItÕs Battling Walmart for Supremacy – BloombergPage 16 of 17https://www.bloomberg.com/news/features/2018-10-18/amazon-battles-walmart-in-indian-e-commerce-market-it-createdcomputers have skyrocketed on Amazon and Flipkart, theyÕve cratered here.Caught in the downdraft is Jagdish Raj Purohit, the owner of a store that billsitself as Sunrise Telecom. ItÕs a shoebox of a space, and Purohit is seatedbehind the cash register at the entrance. Along one side are hundreds of casesfor every conceivable smartphone model. On the other is a combination oflow-end and midprice phones, as well as a Vivo V11, an upscale model fromChina that sells for 26,000 rupees. Purohit doesnÕt expect to sell many. ÒAllmobile sales have gone online,Ó he grouses, when asked the customary Hindiquestion ÒDhanda kaisa hai?Ó (ÒHowÕs business?Ó) ÒFlipkart and Amazon arealways advertising discounts on such phones, so who will come here?Ó Hetries to make up the shortfall by selling accessories.At Raj Shree Computech down the street, Mahendra Kumar and his twobrothers have been selling computers and accessories for a dozen years. Forthe last few, business has been Òthoda thanda,Ó a bit cold. ItÕs not a greatmystery why. ÒWhoever comes here quotes laptop prices from Flipkart andAmazon straightaway, even before we say anything,Ó says Kumar. Or ÒtheyÕllcome here and try many headphones for sound and then walk out sayingtheyÕll be back later. We know they arenÕt coming back.Ó Like his fellow shopowner down the street, Kumar is reluctant to become a seller on Amazon orFlipkart because margins are slim and returns create headaches.While e-commerce is churning up SP Road, its impact is less obvious at K.R.Market, a cacophonous outdoor bazaar about a 10-minute rickshaw rideaway. Sari-clad women hawk mounds of eggplant and beetroot, workers carrygunny sacks of sweet lime, orange, and jasmine from trucks, vendors screamout prices, and buyers haggle as they fill bags with produce. Here is Indianretail in all its chaotic originality, untouched, for now, by the internet and theindustrialists looking to build their empires on top of it. Ramesh Kumar, whofor 30 years has sold mountains of blood-red pomegranates, has never even
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 1 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176Amazon, to Win in BoomingRural India, Reinvents ItselfThe retailer is targeting hundreds of millions of newonline shoppers in IndiaÕs countryside by addingHindi and videos to its order screen and openingstores to help people shop; local deliverymen takecashBy Eric Bellman Photographs by Rahul Dhankani for The Wall Street JournalUpdated Dec. 31, 2018 1:03 p.m. ETDHOWACHALA, IndiaÑ Amazon.com Inc. AMZN -2.18% is building alogistics network from scratch to target customers in IndiaÕs rural backwatersÑthe home of more than 800 million people, many of whom have little accessto retailers. Most are new to online shopping and often donÕt havesmartphones, credit cards or even delivery addresses.What they do have is money to spend.Amulya Bhuyan, 37 years old, lives in Dhowachala, in the northeastern stateof Assam, and has few ways to buy new things. It takes hours to get to thenearest small town from the village of 1,000 people.Mr. Bhuyan, a teacher, made his first purchase on Amazon in 2016. After arecent delivery of a pair of jeans, he showed off other acquisitions: the shoes,socks, pants and shirt he was wearing; in his house, the curtains, glasses,flowery decals decorating the wall, a peacock clock and a painting of sevenwhite horses running in the moonlight.
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 2 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176ÒBefore I didnÕt even know where to buy these things, and now they arrive onmy doorstep,Ó he said.A deliveryman who takes packages around the neighborhood of the Amazon store in Maddur.Last year IndiaÕs rural shoppers accounted for more than $400 billion ofretail sales. Investment bank Barclays PLC estimates Amazon in Indiarecorded more than $7 billion in gross merchandise volume, an e-commercemeasure of the amount of business transacted, in the fiscal year that ended inMarch. ThatÕs about 2% of what it records world-wide.AmazonÕs efforts here face direct competition from Walmart Inc. and localstartups, who are all trying to capture customers jumping directly to e-commerce thanks to the recent rollout of 4G mobile internet across India.Amazon expects the number of online shoppers in India to triple in the next
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 3 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176few years, most of them from rural areas. More than 80% of its newcustomers this year are from outside IndiaÕs biggest cities, it said.The Seattle giant has modified its app to work with inexpensive smartphonesand patchy cellular networks. It has added hundreds of thousands of Indianlanguage descriptions of products and videos for those who canÕt read, and ithas opened physical Amazon stores to walk people through the process ofordering online. It brought on tens of thousands of local distributors todeliver packages, often by bicycle down dirt roads, where it will accept cash ordigital payment on delivery.Since starting operations in 2013, Amazon has pledged to invest more than$5 billion in India on its warehouses and logistics network, technology,customer and seller recruitment as well as staff and content development forAmazon Prime.China has proven there are fat pockets of profits for e-commerce companiesthat reach rural areas. Alibaba Group Holding Õs Taobao, J.D.com Inc. andothers have been the trailblazers in a rural e-commerce market there that hasballooned sevenfold in the past four years to more than $180 billion. Amazonhas small operations in China but hasnÕt been competitive with thehomegrown giants.A Better ScreenAmazon redesigned its app in India to make it easier for peoplenew to online shopping. It’s part of a push to bring in some of thecountry’s hundreds of millions of rural shoppers.
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 4 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176The app offers tips in Hindi on how to find products.Cash on delivery is allowed. Customers can try on or see products beforepaying.Customers can arrange for delivery to a nearby shop.No email address is needed for an account, just a phone number.Machine learning is translating all descriptions into Hindi, and morelanguages will follow.More icons make it easier for nonreaders, and more video descriptions havebeen added.A digital wallet means customers without cards or bank accounts can pay or
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 5 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176get money back.Source: the companyIn India, Amazon invested aggressively, making use of powerful search andlogistics technology as well as an advertising blitz and discounts to capturecustomers. This year it passed Flipkart, the homegrown leader Walmartbought for $16 billion this year, to become IndiaÕs biggest e-commercecompany by gross merchandise volume, according to estimates by Barclays.Selling to Indians who live outside cities has long been a challenge. Thestandard retail outlet in the countryside is a closet-size store, where simple,small and inexpensive productsÑsoap, cigarettes or snacksÑare sold afterdribbling their way through multiple middlemen. The result is limitedselection, poor quality and relatively high prices for rural consumers.Traditionally, big purchases have required a long trip to a town or weeklymarket.Now, Amazon is enlisting the small stores as package depots along itsdistribution network. Other small retailers have become Amazon learningcenters for new shoppers.Arjun, 29, runs a tiny Amazon store in Maddur, in the southern state ofKarnataka, where people can get help learning how to search and order.Customers walk in with screenshots of something their favorite Bollywoodstars wore, and Mr. Arjun, who uses one name, gets the search started.Seated at linked computer screens, the customers, most of whom arenÕtcomfortable with English or typing, can follow along as he pulls up options.He helps them pick the right size using a chart on the wall and a footmeasuring device. Later, customers come back to pick up their orders and paycash at the store. There is even a changing room so they can try on clothes
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 6 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176before paying.ÒIt helps me introduce people to the strange new world of the internet, wherethey can buy everything, try it and even return it,Ó said Mr. Arjun. He gets an8%-10% commission on sales.The Amazon store in Maddur, where staff help customers shop online and can take delivery ofpackages.A college student, Likhit, who uses one name, comes in to shop for asmartphone, wanting one that takes good selfies and has a fingerprint sensor.Mr. Arjun shows him some models. Mr. Likhit said he likes being able to tryproducts before he pays and not having to worry about English.ÒI canÕt risk making a mistake and placing an order incorrectly,Ó said the 18-year old. ÒIt involves money after all.Ó
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 7 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176To make its screen easier to understand, Amazon added icons for books orelectronics or beauty products. When it figured out customers didnÕt knowthe magnifying glass was a standard symbol for searchÑsome were calling itthe ping-pong paddleÑit added pop-up descriptions and recommendations inHindi.Then thereÕs the ÒAdd to CartÓ button. ÒIt is not just about the translation butabout the mental model of dropping something into the cart,Ó said ZahidKhan, senior manager of customer experience at Amazon India. ÒThere arelots of places in India where customers have never even seen a cart. We mighthave to change that into Ôbag.Õ ÓHumans translated descriptions for 35,000 of AmazonÕs most popularproducts into Hindi. That allowed a machine-learning system to master thelanguage, and eventually every product description will be translated.Amazon said it plans to add voice searches and descriptions in other majorIndian languages.
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 8 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176Satish working at his barbershop. He said his father would spend more than half a day every week atthe nearest market to buy goods. Now Satish orders most of what he wants online.Amazon added video descriptions for tens of thousands of its best-sellingitems, after labs set up to observe IndiansÕ online surfing and shopping habitsnoticed that many would find a product they liked, and then leave the site tofind a video about it.The most difficult part of reaching rural customers is delivery. The post officeis known for being inefficient. Amazon used data showing the location ofpeople searching its site to figure out which parts of India need more deliverycapability. Then it reached out to small businesses for help.Nogenchandra Das, 31, responded. In the small town of Jorhat in Assam, heoperates a dusty, shed-size store, with a few shelves to display basic goodsÑcooking oil, rice, a few kinds of hard candiesÑand a corner to pile Amazon
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 9 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176packages delivered every morning. He signed up for the ÒI Have SpaceÓprogram, along with more than 20,000 mom-and-pop stores, offering to takepackages and deliver in neighborhoods for a commission.Amazon gave him a uniform, a bag and a week of training. A motorcycledeliveryman brings about 25 packages a day from a small distribution centernearby. Customers can come pick them up at his shop, or he will deliver themon his own motorcycle. After living his whole life in the neighborhood, heknows many addresses just by looking at the family name.Nogenchandra Das at his small shop in Jorhat. He signed up for an Amazon program to takepackages and deliver in the neighborhood.Amazon desperately needs the local knowledge; the address system in India isso chaotic people will often give their locations by using a local landmark. ÒItcan be something like Ôbehind the templeÕÑbut you donÕt know which temple
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 10 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176they are talking about,Ó said Akhil Saxena, vice president of customerfulfillment at Amazon India.Stitching small stores into AmazonÕs global supply chain meant logisticstechnology had to work on basic smartphones, the only technology mosthave. The phone is used to scan deliveries, record payments, arrange forreturns and take signatures. For neighborhoods without cellphone coverage,the app can work offline and update the Amazon system later.Rural users are less likely to have credit or debit cards, so Amazon lets thempay cash when they receive their items. When it struggled to provide all thechange needed, it launched Amazon Pay, so customers could receive changeor refunds electronically and also pay utility bills and buy things elsewhereonline.
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 11 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176The ferry across the Brahmaputra River.Walmart, AmazonÕs main foreign competitor in India, is using its nationalnetwork of wholesale stores to sell and deliver directly to country stores,restaurants and other businesses. Flipkart, the Walmart unit, is also buildingits own delivery network using freelancers to reach rural customers, and hasasked the government for permission to start drone deliveries.StoreKing is a local startup that focuses on using e-commerce to sell basicsupplies to small rural retailers. It said its strategy is to focus on businesses,delivering a small selection of popular items to shops, and helping themmanage their costs, inventory and deliveries. StoreKing also works with othere-commerce players, including Amazon, for whom it developed and managedits assisted shopping outlets in the south, for example.Hooking New CustomersAmazon is expanding rapidly in India, as online sales theresteadily become more important to retailing.E-commerce as pct. of total retail sales in India
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 12 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176AmazonÕs gross merchandise volume in India$12% billion493621300Õ162015Õ18Õ17Õ16
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 13 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176FY 2015Õ18Õ19 Õ17Õ19 *For fiscal years ending in March EstimateSources: Barclays (Amazon); eMarketer (e-commerce)Mom-and-pop shops, meanwhile, are demanding more protection fromonline retailers. The stores wield power through their voting numbers, andthrough local and national lobbying organizations such as the Confederationof All India Traders. They have effectively blocked many foreign retailersfrom entering India. Last week, India unveiled new restrictions on foreign-owned e-commerce companies in response to their complaints.
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 14 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176Champak Bez delivers a new pair of jeans to Amulya Bhuyan, a teacher in Dhowachala, who oftenbuys on Amazon because there are so few retail options in the small town. He paid by using a debitcard on a portable device.Champak Bez, 25, delivers for Amazon in Dhowachala, not far from where hegrew up. Every morning, he loads up a big backpack with 30 to 50 packagesfrom the Jorhat distribution center, scanning each package with his phone ashe goes.Most packages are smallÑpurchases are often less than $10, for items such assocks, chargers, cosmetics and sunglasses. Amazon developed Òmother bagsÓto sort the tiny parcels, so delivery people donÕt have to handle each oneindividually in transit.To get to Dhowachala, Mr. Bez squeezes his motorcycle onto a barge that fitsaround 20 other two-wheelers, plus people and cars for an hourlong trip
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 15 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176across the Brahmaputra River. Downriver is a national park that is home towild elephants, tigers and rhinoceroses. Upstream are the tea plantations forwhich Assam is famous.Once there he rides his Bajaj Pulsar over backbreaking, rough roads. Most aredirt, and the ones near the riverÑjust like the homesÑare elevated 10 to 20feet to accommodate seasonal flooding.GoogleÕs map app provides limited detail for the area so he depends on hisown experience and asking around. Once he has found a customer he recordsthe exact coordinates, so the next delivery will be easier.An Amazon deliveryman maneuvers small, rural lanes on his motorcycle.ÑVibhuti Agarwal and Newley Purnell contributed to this article.
2/8/19, 10:30 AMAmazon, to Win in Booming Rural India, Reinvents Itself – WSJPage 16 of 16https://www.wsj.com/articles/amazon-to-win-in-booming-rural-india-reinvents-itself-11546196176Write to Eric Bellman at email@example.comAppeared in the December 31, 2018, print edition as ‘Amazon ReinventsItself For Booming Rural India.’
7/25/16 1:57 PMHow Amazon Adapted Its Business Model to IndiaPage 1 of 6https://hbr.org/2016/07/how-amazon-adapted-its-business-model-to-iÉwsletter_weekly_hotlist&utm_medium=email&utm_campaign=hotlist_dateBUSINESS MODELSHow Amazon Adapted ItsBusiness Model to Indiaby Vijay Govindarajan and Anita WarrenJULY 20, 2016When Amazon decided to enter the Indian e-commerce market, it was clear from the outsetthat something would have to give. That something was the very business model that hadmade Amazon an internet powerhouse in the U.S.
7/25/16 1:57 PMHow Amazon Adapted Its Business Model to IndiaPage 2 of 6https://hbr.org/2016/07/how-amazon-adapted-its-business-model-to-iÉwsletter_weekly_hotlist&utm_medium=email&utm_campaign=hotlist_dateINSIGHT CENTERHow Digital Business Models Are ChangingSPONSORED BY ACCENTURENo strategy is static.Amazon.com debuted as an online bookstore in 1994. Founder Jeff BezosÕs initial businessmodel was fairly simple: Source a single product type from wholesalers and publishers andsell it directly to consumers on the then fledgling internet. Thanks to BezosÕs vision and ahighly successful, user-friendly website, by 1997 Amazon.com was the first online retailerto boast one million customers. As the company added more titles and expanded its productline, it developed an ecosystem rooted in the wholesale purchase of goods; huge,strategically located fulfillment centers; and contracts with national and regional carrierswho shipped its products throughout the U.S. and to other countries.A decade into the new millennium, India, with its billion-plus people and largely untappede-commerce market, beckoned. The country posed a classic case of good news, bad news.The good news included a very young populace Ñ more than 65% under age 35 Ñ risinglevels of disposable income, and ubiquitous cell phone ownership (80% of the population,by one estimate).The bad news: 67% of the population lives in rural areas characterized by anunderdeveloped infrastructure. Only about 35% of IndiaÕs population is connected to theinternet. Cash, not credit cards or checking accounts, is still the rule. And, determined toprotect its own, India enacted a rigid FDI policy restricting foreign multibrand retailers fromselling directly to consumers online. That meant any venture would basically be a third-party seller for Indian-made products.Challenges, possibly even hurdles, forAmazon, but not insurmountable ones Ñ theyjust required an innovative business model,beginning with finding products to sell.
7/25/16 1:57 PMHow Amazon Adapted Its Business Model to IndiaPage 3 of 6https://hbr.org/2016/07/how-amazon-adapted-its-business-model-to-iÉwsletter_weekly_hotlist&utm_medium=email&utm_campaign=hotlist_dateThere is no shortage of goods produced by Indians, but most vendors in the country aresmall. Three years ago, relatively few retailers there sold their products online because theybelieved e-commerce to be too complex and time consuming. And IndiaÕs cash economy didnot facilitate online transactions.To respond to these challenges, after launching its Indian website in 2013, Amazondeveloped a program to recruit an army of suppliers and convince them it was a trustworthypartner that could help them increase the market for their products. Amazon wheeled out aprogram called Amazon Chai Cart: mobile tea carts that navigated city streets, servingrefreshments to small-business owners while teaching them the virtues of e-commerce. TheChai Cart team reportedly traveled more than 9,400 miles across 31 cities and engaged withmore than 10,000 sellers. To help these sellers get online quickly and address theirobjections to e-commerce, last year Amazon created Amazon Tatkal, a self-describedÒstudio on wheelsÓ that provides a suite of launch services, such as registration, imaging,cataloging, and sales training.But Amazon also had to adapt delivery and fulfillment. In the U.S., Amazon uses acentralized shipping platform, which it calls Fulfillment by Amazon (FBA), to store anddistribute the products it sells. Sellers send their goods to AmazonÕs fulfillment centers andpay a fee for the corporation to store, pick, pack, and ship their wares. Amazon implementedFBA in India as well, and to date has built nearly two dozen warehouses there, the largestone in Kothur in Telangana.The company also localized its fulfillment platform in India by introducing Easy Ship andSeller Flex. With the former, Amazon couriers pick up packaged goods from a sellerÕs placeof business and deliver them to consumers. With the latter, vendors designate a section of
7/25/16 1:57 PMHow Amazon Adapted Its Business Model to IndiaPage 4 of 6https://hbr.org/2016/07/how-amazon-adapted-its-business-model-to-iÉwsletter_weekly_hotlist&utm_medium=email&utm_campaign=hotlist_datetheir own warehouses for products to be sold on Amazon.in, and Amazon coordinates thedelivery logistics. This ÒneighborhoodÓ approach is convenient for sellers and has benefitedAmazon by speeding up delivery of some products.Amazon has contracts with a number of major delivery services in the country, includingIndia Post and cargo airline Blue Dart. Last year it set up a subsidiary, AmazonTransportation Services Private Limited, to augment delivery. And it utilizes bicycle andmotorbike couriers for last-mile deliveries in both urban and rural communities. But ruralareas, which often are literally off the beaten path, pose special challenges.India is liberally peppered with small shops Ñ more than 14 million of them, theoverwhelming majority smaller than 600 square feet. These so-called mom-and-pop storestypically feature high prices and limited inventories, but in many rural communities theyare the only game in town. The governmentÕs FDI restrictions are designed in part to protectthese convenience-store owners. When Amazon.in debuted, many Indians feared the onlinebehemoth would put them out of business.Instead, Amazon has enlisted mom-and-pop store owners as partners in its deliveryplatform. In small villages and remote areas where few people have internet access,residents can go to their local store and use the ownerÕs internet connection to browse andselect goods from Amazon.in. Store owners record their orders, alert customers when theirproducts are delivered to the store, collect the cash payment, and pass along the moneyÑ minus a handling fee Ñ to Amazon. The arrangement neatly circumvents the problem ofconducting e-commerce in a cash economy. And store owners report increased sales of theirown while customers are on-site.
7/25/16 1:57 PMHow Amazon Adapted Its Business Model to IndiaPage 5 of 6https://hbr.org/2016/07/how-amazon-adapted-its-business-model-to-iÉwsletter_weekly_hotlist&utm_medium=email&utm_campaign=hotlist_dateFrom product to delivery, Amazon has reinvented its ecosystem to address the challenges ithas faced conducting an e-commerce enterprise in India. This past June, Amazoncommitted another $3 billion to its India operations, demonstrating continued faith in theÒhuge potential of the Indian market.Ó Its funding and efforts are outpacing those of itscompetitors, including Flipkart and Snapdeal. ThatÕs because there is a lot at stake. A recentGoogle/A.T. Kearney study predicts online retailing in India will expand to 175 millionshoppers Ñ three times the current number Ñ by 2020. E-commerce is widely expected toexceed $100 billion by that same year. Morgan Stanley Research estimates thenumber could rise to $137 billion. And given that mobile wallets already outnumber creditcards and are increasing in popularity, the stakes could be even higher.Vijay Govindarajan is the Coxe Distinguished Professor at DartmouthÕs TuckSchool of Business and a Marvin Bower Fellow at Harvard Business School. He is the authorof The Three Box Solution: A Strategy for Leading Innovation (HBR Press, April 2016).Anita Warren is a business writer and marketing consultant in New Hampshire.Related Topics:EMERGING MARKETS| GLOBAL STRATEGY| SOUTH ASIAThis article is about BUSINESS MODELS FOLLOW THIS TOPIC
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