Can Amazon Succeed In India?

Summary

Amazon has opened its largest office building to date in Hyderabad, India, spanning 1.8 million square feet and accommodating 15,000 workers. This move signifies Amazon's aggressive investment and commitment to the Indian market, which represents significant untapped potential with e-commerce accounting for just 3% of total consumption. Despite facing competition from Walmart and regulatory challenges that forced the removal of nearly a third of its sales in India, Amazon is adapting by expanding its brick and mortar presence, investing in local supermarket brands, and launching AmazonFresh. The company is also targeting rural customers and offering localized versions of its app and website. While Amazon's international unit operates at a loss, the company is willing to sustain losses for a long-term strategic play in India's burgeoning market.

Takeaways

• 🌏 Amazon has opened its largest office building to date in Hyderabad, India, showcasing a significant commitment to the Indian market.
• 🏢 The new campus in Hyderabad spans 9.5 acres with 1.8 million square feet of office space, exceeding the capacity of Amazon's Seattle headquarters.
• 👥 The Hyderabad campus has the capacity to accommodate up to 15,000 workers, indicating Amazon's aggressive expansion plans in India.
• 💼 Amazon's investment in India has surpassed $5 billion since it began retail operations in 2013, highlighting the potential of the Indian market.
• 📈 E-commerce in India represents only 3% of total consumption, with a population of 1.3 billion and less than half online, suggesting enormous growth potential.
• 🌐 With the rollout of India's 4G network, Amazon aims to capitalize on increasing internet penetration to outcompete local and international rivals.
• 💰 Analysts predict the Indian e-commerce market will be worth $100 billion by 2022, making it a crucial market for Amazon's future growth.
• 🛒 Amazon faces stiff competition from Walmart, which acquired Flipkart for $16 billion, giving it a significant share of the Indian e-commerce market.
• 📉 New e-commerce regulations in India have made it more challenging for multinational corporations like Amazon to compete with local retailers.
• 🛍️ Amazon has had to pull nearly a third of its sales in India due to new regulations banning foreign-owned retailers from selling through affiliated companies.
• 🔄 Despite regulatory challenges, Amazon is adapting by expanding its brick and mortar presence and investing in a hybrid retail approach in India.
• 🛒 AmazonFresh, the company's online grocery business, is expanding in India, targeting the largest retail segment which accounts for a significant portion of household spends.
• 📚 Learning from its failure in China, Amazon is focusing on rural customers in India and has introduced measures to cater to local preferences and conditions.
• 💡 Amazon's long-term investments in India, including building new campuses and adapting its services, may take time to reflect in profits and could involve sustained losses for a decade.

Q & A

Where is Amazon's biggest office building located?

Amazon's biggest office building is located in Hyderabad, India.

What is the total area of Amazon's new campus in Hyderabad?

The new campus in Hyderabad covers 9.5 acres with 1.8 million square feet of office space.

How many workers can the new Amazon campus in Hyderabad accommodate?

The new campus in Hyderabad has the capacity to hold around 15,000 workers.

When did Amazon start its retail operations in India?

Amazon began its retail operations in India in 2013.

How much has Amazon invested in India since starting its retail operations?

Since 2013, Amazon has invested more than five billion dollars into India.

What percentage of total consumption in India is currently represented by e-commerce?

E-commerce currently represents just 3 percent of total consumption in India.

What is the current population of India and what percentage of it is online?

India's population has swelled to 1.3 billion, with less than half being online.

What is the projected value of India's e-commerce market by 2022 according to analysts?

Analysts project that India's e-commerce market will be worth 100 billion dollars by 2022.

What is the current market share of Walmart in India's e-commerce market through its acquisition of Flipkart?

Before the acquisition by Walmart, Flipkart controlled an estimated 40 percent of the Indian e-commerce market.

What is the current state of India's retail market in terms of control by small local retailers?

Roughly 90 percent of India's retail market is still controlled by small mom and pop stores.

How has the Indian government's regulation affected Amazon's operations in India?

The Indian government's regulation has banned direct to consumer sales for foreign-owned retailers and has also prohibited foreign e-commerce companies from selling products through affiliates they own a majority stake in, leading Amazon to take down thousands of products on its website.

What steps is Amazon taking to adapt to the Indian market and overcome regulatory obstacles?

Amazon is expanding its brick and mortar presence, investing in Future Retail, expanding its online grocery business AmazonFresh, and focusing on rural customers with small stores and an alternate version of its app designed for inexpensive smartphones and spotty internet access.

What is Amazon's strategy in India in terms of language and regional focus?

Amazon launched its Hindi website last year and plans to add a variety of regional languages soon, with an emphasis on rural customers who make up 80 percent of its current Indian customer base.

What lessons has Amazon learned from its e-commerce operations in China and how is it applying them in India?

Amazon learned the importance of fitting products and services to the local market from its experience in China. In India, it is taking a different strategy with more emphasis on rural customers, setting up small stores in rural areas, and offering an app version designed for inexpensive smartphones with spotty internet access.

How long is Amazon willing to sustain losses in the Indian market?

Amazon is willing to sustain losses in the Indian market for a long period, with estimates suggesting they might be prepared to do so for up to 10 years.

What is the current status of Amazon's international e-commerce unit in terms of profitability?

Amazon's international e-commerce unit consistently operates at a loss.

Why is India considered crucial for Amazon's future growth?

India is considered crucial for Amazon's future growth due to its large population and the potential of its e-commerce market, which Amazon hopes can become another cash cow as growth slows in North America.