On one hand, Flipkart and Snapdeal are turning to brands due to financial crunch. On the other hand, Amazon India is rich by Rs 1,350 crore, thanks to its parent company.
The American etailer, who is on a roll after becoming customers’ favourite over Snapdeal and Flipkart, decided to pour more funds into its Indian arm to boost growth.
A generous 3-year Anniversary gift
Amazon India will complete 3 years in the first week of June. And in a very short span of time, the etailer has managed to scale on top of the ecommerce leadership board. With the fresh funds, it is looking to dive even deeper in the Indian online market.
Reports suggest that the Rs. 1350 crore is going to be invested in Amazon Seller Services.
“This is only the tip of the iceberg. While Flipkart and Snapdeal are struggling to attract new capital, the strategic commitment from Jeff Bezos gives Amazon India a huge advantage,” said Kartik Hosanagar, Professor at The Wharton School.
Blinkers on for India
Jeff Bezos loves India business and has never shied away from investing millions in the country. However, besides money the etailer made sure to localize its strategies to suit the Indian market. A lesson that it learned the hard way after failing in China.
Experts point out that Amazon failed in China because they tried to implement global policies instead of understanding the Chinese market and customizing strategies. Other factors such as lack of aggressive marketing and high-priced products contributed to the collapse as well.
The lessons learned in China helped Amazon to be better prepared for India.
“We have done much more local market customisation in India than we did in China,” accepted Bezos.
Amazon’s localized strategy includes India-specific digital wallet, app, ad campaigns, a wide range of products, top-notch customer service and seller initiatives. The result? It is India’s most trusted ecommerce brand as of now.
But how will Amazon continue to spend?
Amazon India is the biggest spender out of all online marketplaces. In the last three years, they have splurged on ads, discounts and other promotional activities to gain market share.
However, with restrictions on influencing price of product by offering discounts & advertisement and 25% cap on sales from a single seller, it will be difficult for Amazon to utilize Rs 1350 crore in a similar manner.
“The FDI policy has clear implications for Amazon’s growth. It cannot depend on Cloudtail (Amazon’s leading merchant) to develop its presence beyond 25% of projected revenues, so it does create a huge push for other merchants and brands,” asserted Devangshu Dutta, CEO of retail consultancy Third Eyesight.
How will the etailer spend the fresh funds? Will other sellers benefit, as Amazon can’t focus on Cloudtail alone?
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