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BW Businessworld

'Biggest Hurdle Is Simplifying Indian Complexities'

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On Tuesday midnight of June 4/5, barely minutes after the Indian website of the world's largest e-tailer Amazon went live on amazon.in, it received its first order from an IIM Ahmedabad student.

It's been more than 8 years since amazon.in was registered. Amazon's India entry has been widely speculated ever since. As a stepping stone 15 months ago Amazon re-launched Junglee (the site it bought from Rakesh Mathur and Ram Shriram and shut down one year later in February 2012) as a comparison site.

Amazon.in, however, comes in as an e-tailer. Since foreign investment is banned in multi-brand retail in India, Amazon launches as a marketplace where buyers meet sellers, similar to eBay or tradus.com.

Amazon's Vice President, International Expansion, Greg Greeley and Amazon India Vice President and Country Manager Amit Agarwal, met BW|Businessworld's Shrutika Verma and Rajeev Dubey on the day of the launch. Excerpts:

Why did it take so long for Amazon to come into India even after buying Junglee in 1997?
That purchase was for a very different purpose. In 1997 we did not have a marketplace. We weren't allowing other merchants to sell on our platform. It was introduced in 2000. There are a lot of things that go into infrastructure. And it is so early for e-commerce in India.

The difference between being in India five years ago or now is very little. It will depend where we end up being ten years from now.
 
When was the decision taken to come into India?
We are not revealing that. There have been people working super hard on this for a number of months.

Is there anywhere else in the world where you started out as a marketplace and not retail?
No, this is the first country where we have started with a marketplace.

What was the biggest hurdle you faced in setting up amazon.in?
The hurdles are around how you localise the global strategy. Building a local fulfillment centre, local delivery, 3D secure payments, India has complex taxation laws… we are constantly thinking about how to keep customers away from that mess.

The biggest hurdle would be how to simplify the complexities that are inherent in India.
 
Read Also: Amazon Is Here But Flipkart Fails To Raise The Ante
 
How big are the two categories that you have launched?
We are starting with 7 million local and imported books and TV and movie shows with 12,000 titles.

Why only the two categories?
This is where we are getting started with. We know what our end point is and we would keep adding additional categories at the right time. Categories like mobile and cameras are the ones you should expect us to launch very soon.
 
What will come next?
This is something we are not ready to talk about at this moment because we know our end goal. You can pretty much look at the order in which we launched categories outside India. You can easily guess what is going to come next.

Why doesn't the mobile app have the India site?
We don't have it yet. We have the mobile site up but it is a very obvious need that we should fulfill. One way to look at is — look at amazon.com that offers us a map as to where we want to be. There is no reason for us to make every single service that is available globally to make available in India.

What is in store for the seller and buyer on Amazon?
A consumer should expect to find a vast selection of products starting in two departments - books, TV and movies, offered by over a hundred sellers to start with. The sellers continue to register with us every day. And given the large number of seller base competing for the same customer, a healthy competition will drive lower prices. Customers would also experience fast and reliable delivery on products that are being fulfilled by Amazon. All of this is layered on top of our convenient and trust worthy online shopping experience that we have built over the years in other market places.

Customers in India get every amazon.com kind of experience  — our search technology and innovative features like search inside the book. We have more than 1.3 million scanned books on amazon.in that allows one to search keywords inside a book. There are richer descriptions; we are syndicating reviews from amazon.com.

For Sellers: There are two services we are launching for the sellers — selling on amazon and fulfillment by Amazon. Both of these offerings are globally proven with our base of two million sellers. These two offerings provide a scalable and robust e-commerce platform for sellers to grow their business online. With these two products… we want the retailers to focus on what to sell and how to price. Everything else like payments, warehousing, delivery and returns is just a distraction from the core business.

Sellers can list unlimited number of products on our website — it is free of charge. They automatically benefit from our shopping experience that we have created, our technology our innovation. We are driving traffic, getting eyeballs for them, they use our payment infrastructure.

How will amazon.in make money?
We charge the retailer for three things: Monthly subscription fee,  referral fee or transactional fee and closing fee for each unit they sell.

As a promotion, monthly subscription has been kept free for the first year. Our referral fee has been discounted from 12 per cent to 5 per cent. Closing fee is around Rs 10 per product.
 
A seller can decide to ship on their own, or use Amazon fulfillment or decide to use both. If he uses our fulfillment service, we charge them for storage too. They pay us monthly based on per cubic space used. Every time we ship their product a shipping fee is charged and there is a referral fee of 1 per cent. It is a pay as you go structure.
 
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Will you charge for listing on amazon.in? Do you do that anywhere outside India?
No listing is free anywhere else in the world and so listing is free in India as well. We want to incentivise trials and not penalise them.

Are you offering COD?
All the items are eligible for COD and these are delivered in a trackable mechanism to the end consumer and if a customer wants to return we collect it from the customer, put it back in the warehouse without charging the seller for it.

How do you track the shipments being shipped by the seller directly?
We don't track it but if the customer has issues with the product they can file with Amazon for refund. We deal with the situation and customer gets the refund. Over time we will introduce what we have in other geographies — allowing the seller to give us the shipping information so that we can track it for them.

How soon can we expect same day delivery to happen in India?
I think it is early to say that because our first objective is to deliver the products to customers reliably. Our goal gradually is to be fast and reliable.

Can a seller opt to use just your delivery network without using the warehousing option?
No, right now we are not allowing that. We do not support sellers storing it, and we picking the product from their warehouse. We don't do this elsewhere in the world too.

Are you also doing logistics and warehousing for people who are not listed on amazon?
Not yet. In other countries we do that but we are not doing right now in India. Best way to look at this is that whatever we do in other countries we would want to do that in India at some point.

Who decides what products will be listed on your website — is it the seller or is it Amazon?

Once we launch a category we don't care what the seller sends.

Why should a seller choose your delivery network over others?
If you are a book seller in India, it costs you Rs 30-50 to ship the book. COD is additional Rs 25-50. In total, it takes Rs 55-100 to ship the book in the hands of the customer, and all this, only if you have great negotiating power with the Blue Dart of the world. I haven't priced in your cost of storage, labour cost, packing, returns, and customer service. If you look at the standard rate of shipping at Amazon and do the math for the same book it will cost you Rs 60 and you don't have to do any of the other stuff that I spoke about. In the first year, the rate that we are offering is Rs 26 per shipment, which is cheaper than the freight cost of shipping the product alone.

Are you subsidising it or have you negotiated this with the logistics players?
We think about a business how it would look ten years from now. We are investing for that scale and which is why we can offer rates which sellers otherwise might not be able to.
 
Do you have your own people employed for shipping and last mile delivery or you are partnering with third party logistics providers?
We have a mix of both in India. We use our own delivery network and external couriers as well.

What is the mix right now?
We are testing both. Our goal is to ultimately provide fast and reliable shipping and by trying both we will figure out what should be the right mix.
 
How many people do you have on foot right now?
That is something we do not disclose.

How many logistics partners do you have?
We are working with a lot of them like Blue Dart, Fedex, Indian Postal service etc. Our goal is to work with whoever can provide a great customer experience.

Are all the sellers who are on Junglee already on amazon.in?
No. The vision for Junglee is very different from amazon.in. Junglee was started to organise all selections in India, and make it easy for the customer to to buy anything anywhere whether offline, online, within India or outside India. It is a map of sellers and products. Amazon.in's vision is to be a one of the places on that map where customers can trust and buy from.

Do you have something like Junglee anywhere else in the world?
No, it is unique to India because retail in India is so unorganised. Search engines are organising documents and not products.

How many sellers do you have? How many of them are offline and how many are online?
We have 100 right now. We have nationally reputed distributors like, Sameer Audio, Pritam Music, UPS, Crossword, Oxford, Delhi Book shop, small law book shop from Kochi. We have a lot of online players who are listed on Junglee.

What payment gateways do you have currently?

We are using Indian payment processes. We don't disclose what our strategy is. Payments go into the list of hard things in India.
 
You do not have your own payment gateway?
Not at the moment. 

Are you planning to have one in future?
We cannot disclose that at the moment.
 
Are you also doing logistics and warehousing for people who are not listed on amazon.in?
Not yet. In other countries we do that but we are not doing right now in India. Best way to look at this is that whatever we do in other countries we would want to do that in India at some point.

How does the logistics pricing compare anywhere else in the world?
Amazon Simple Pay of the product is lower in category like media. So it might become more expensive there. As a percentage it is probably in line with other markets but as absolute value they are definitely lower than Europe.

What is the vision for amazon in India?
It is exactly the same as our global vision. We want to be the most customer-centric company and we want to build a place where customers can find, discover and buy virtually anything online. This means that until we get to earth's biggest selection we won't rest.

The only thing that we do in other markets but are not doing in India is that we participate in the marketplace as one of the sellers. And because of the regulations we are not entering as a seller.
 
What kind of investment has gone into India?
We do not disclose that. We have a long term view and we ask ourselves where do we want us to be in next 7-10 years and hence where should we start and that is how we decide how much to invest.

Where are your fulfillment centres?
We are starting with one in Mumbai.

How big is it and how does it compare to some of those outside India?
It is about 150 thousand square feet. That is consistent with the first fulfillment centre we put in each country. It is actually bigger than what we do in some of the countries.

What is the biggest centre you have?
It is as big as a million square feet. As we figure out the foot print we want…that will mean building some big fulfillment centre in certain parts of the country and some smaller ones in other parts of the country. This is the same road map we followed in other countries.

Where will be your next fulfillment centres?
At this point we don't have a timeline on that. In some countries we make do with one massive fulfillment centre and in others we might position in different places. All of it depends on where is consumer demand and where is seller demand. And what is the need to get closer to this demand versus just expanding the one that we start with.

Does that indicate demand is more in Mumbai market?
No, we look at which places allow us to optimise consumer and seller demand. So you could argue that Mumbai, Delhi any could be a starting point. But in terms of expanding the footprint we would constantly look at which place allows most sellers to use our offerings because India has taxation issues and inter-state tax rules. We have to see where both seller and customer will benefit the most.