Amazon’s Winding Entry

More than seven years after registering its Indian website, the world’s largest e-tailer Amazon is finally going live with www.amazon.in before Diwali this year. According to informed sources, Amazon has begun approaching merchants and sellers for tie-ups.

However, to the disappointment of many online shopping enthusiasts, the general consumer will still not be able to buy directly on amazon.in until the government allows foreign direct investment (FDI) in multi-brand retail in India. Until then, amazon.in is likely to be a wholesale cash and carry website — an online version of the Metro Cash & Carry or the Walmart-Bharti’s Best Price Cash & Carry stores sprouting across the country. India already allows 100 per cent FDI in the wholesale cash and carry business from whom only registered retailers — not consumers — are allowed to buy.

“In its next avatar, Amazon will be doing business to business (B2B) operations only due to FDI regulations in India,” says a source who is in the know. Amazon is in talks with brands such as Philips, Panasonic and Sony, which are likely to be sold on the website.

Products sold to retailers on amazon.in will be delivered by its inhouse logistics and companies such as Aramex, Blue Dart and several local players with whom the company has recently inked a deal. Earlier in January, Amazon got the government’s nod to set up a logistics unit in the country. The Foreign Investment Promotion Board allowed Amazon Asia-Pacific Resources to set up a wholly-owned subsidiary to handle backend logistics such as last-mile delivery and warehousing services on the outskirts of Mumbai. Amazon committed an investment of Rs 15 crore in the subsidiary.
The company has been aggressively poaching talent for its backend business from logistics companies such as Aramex and Blue Dart.

Amazon already has a network of nearly 1,400 merchants who sell their products via Amazon’s other entity in India, junglee.com. The website was acquired in 1998 and re-launched in February this year as an e-Bay-like platform to connect the buyer with the seller. Foreign e-tailers take this route because India prohibits foreign funded e-tailers from selling directly to the consumer.

Another speculation doing the rounds in the market is that amazon.in could also be launched as an eBay-like marketplace instead — just an extended version of junglee and the payments or the actual purchase will be allowed to take place on its website rather than directing to sellers’ portal. “Given the restrictions around FDI, Amazon can only operate in wholesale cash and carry or as a marketplace. A marketplace makes more sense at this moment given that it has already understood the market dynamics with junglee.com,” according to an industry expert who works closely with foreign investors in India. But this seems highly unlikely since it will cannibalise junglee.com’s business.

Irrespective of what form amazon.in takes, the fact is that the world’s largest e-tailer’s patience is running out and rather than wait and watch from the sidelines, it would rather keep itself e-tailing ready in India.

(This story was published in Businessworld Issue Dated 20-08-2012)