There was a time around 2017 when the Indian ecommerce battle seemed to be poised between the two American retail giants – Amazon and Walmart. The latter had bought Flipkart for $16 billion and the industry was abuzz about how American biggies would battle it out on the Indian turf. While no one underestimated the might of Reliance Retail, it was largely a physical store play then. The retail ecosystem is vastly different today - omni-channel is the order of the day and more importantly it's not the Americans who have an edge, it's the homegrown Reliance Retail which is at the helm with a carefully crafted omni-channel strategy (with the likes of Facebook and Google investing in the company). The Tata Group with the launch of Tata Neu and the acquisition of grocery ecommerce company, BigBasket, is formidable too.
Reliance has also announced an aggressive FMCG play through its retail arm (it has acquired brands such as Campa Cola and more such acquisitions are on the way), an opportunity that Amazon India will not be able to capitalise on since FDI norms don't allow it to be anything more than a marketplace. Does the current retail environment bother Amazon India? Manish Tiwary, country manager (India Consumer Business), Amazon India, says that despite the intense conversations about ecommerce, it is in its infancy, about 2%-4% of the overall organised retail market. "We are always encouraged at Amazon to be customer focused and never competitor focused. We do observe competition, but our strategy is consumer-focused. The penetration of ecommerce grocery is not even 1%, even fashion is under 1%. We have a customer base and a seller base, but we still have a long way to go."
But with omni-channel becoming the way forward, won't not having a retail presence or presence with one's own brands become a deterrent? After all, Reliance is planning to distribute its private brands through its kirana store partners, just as traditional consumer product companies have always done. Tiwary agrees that omni-channel is indeed the way forward, but Amazon India, he says, is quite content with its marketplace model. He says Amazon's focus has always been to change the way India buys and sells by offering a wide selection, pricing, affordability and convenience. "Even in markets where retailing is allowed, 50% of the business comes from the marketplace model. The entire thing of getting more selection which appeals to more customers, better pricing and affordability, all this will come only when you have a large number of sellers contributing. We have 200,000 plus local stores selling on our platform. We will do whatever we are doing, try to solve bigger customer problems. We feel comfortable with the current market place model we are operating at," explains Tiwary.
Tiwary takes pride in helping local businesses to build brands rather than building his own brands. He cites the example of personal care brands, WoW and Mamaearth (which are now unicorns), which came to Amazon during their initial days and the former onboarded them on Amazon Launchpad. "Both the brands had zero sales. We asked them to focus on the product and we would list them, they didn't have to pay fees for some time. In the gadgets space we did a similar activity with BoAt and Noise. A decade ago, if you wanted to launch a consumer product at a national level, the first challenge was distribution and advertising. You would have to wait to reach a certain scale else you couldn't afford advertising. What ecommerce has done is that anyone who has a great idea can now actually focus on his/her skillset of creating that product, you pay only when there is a performance of buying, you can manage it with a small budget and distribution is taken care off. This is driving consumption and it is critical to get to the $5 trillion economy."
Amazon's omni-channel play will largely be through its over 2 lakh local store partners. In early 2020, the marketplace launched 'Local Shops On Amazon' as part of which it onboarded local hardware, electronic goods, fashion and food stores onto its platform. "In Delhi one of our most successful businesses which happens through local stores is inverter batteries. They are difficult to transport from a warehouse as they are heavy and hazardous too. Today if Amazon isn't selling inverter batteries you would go to offline stores. By onboarding a local store, transportation becomes easier and cheaper, the store owner would also be happy to install it at your home. The local shop gets business, we get fees out of it and the customer gets more visibility and transparency. It also helps me deliver a bigger selection. India will be the marketplace which will unlock the local stores at scale."
Branded Play
If global marketplaces are not allowed to own brands, how can Amazon have brands such as Amazon Basics, Solimo, Presto or Amazfit? "Because of FDI rules we are not supposed to have our own brands, they are either licensed or we are developing them together and are sold by a third-party seller," explains Tiwary. The marketplace has more than 1,500 seller store brands.
"If a producer comes to us and says we want to sell on your platform, we do the due diligence and say that we will work together. There is a commercial agreement and that's how we launch the brand. We also have brands which Amazon may own worldwide which we license to a third-party manufacturer. For instance, we are giving AmazonBasics licensing to manufacturers who are great at that product and they are selling it on their own," Tiwary further explains.
In fact, if one were to search for a detergent, a smartwatch or even ethnic-wear on Amazon, the search would invariably throw up the options offered by the Amazon promoted brands on top. While it's certainly a boon for the fledgling brands, established brands often complain that they are not the top choice on Amazon unless they pay for it. In fact, this is one of the reasons why many of them prefer selling from their own website rather than depend on marketplaces.
However, Amazon's brand strategy also includes partnering with established brands. Tiwary says Amazon has partnered with brands such as LG, Samsung, P&G and Colgate to launch products. "Consumers often search for products such as three-star air-conditioners without a remote. We aggregate these searches and share them with our brand partners. Only if a brand doesn't see value in launching only then we bridge it by launching under our own private brand," he explains. "It's not our first preference, we realise the value of brands," he emphasises.
Are there plans of taking AmazonBasics or the seller brands omni-channel? Tiwary says that the decision to go omni-channel would depend on the seller. "I see myself as a market place which is, I create a range of services for consumers," says Tiwary. "I continue to anchor myself on one large statement which is about changing the way India buys and sells, making a positive impact on the country. The pledge to give incremental employment to 2 million people in the extended eco-system; the pledge around digitisation because we understand technology and the pledge to export $20 million by 2025 are the things which keep me anchored."
