Syna Dehnugara is in conversation with Amit Agarwal, Country Head – India at Amazon.
He talked about how India is a very long term opportunity for Amazon and Amazon’s primary focus has been how they offer massive selection to customers, provide great value so that customers can afford to buy more and provide great convenience so that they can get their items shipped fast.
Edited Excerpts:
India found a specific mention in the Jeff Bezos’s shareholder letter that came out a couple of days ago. He called out India as one of the market that is growing well, how Amazon is a leader in India. But tell me if I had to juxtapose that with a Forrester research report that came out that said that actually they are driving down their estimates of how big the e-commerce market in India is going to be – the online retail market they have predicted would be $75 billion by 2020 but now they are saying it is only going to be only $48 billion?
First of all we are very fortunate to find a mention in Jeff’s letter. If you look at 2017 and continuing in 2018 Amazon India is the fastest growing e-commerce market place out there based on SimilarWeb, App Annie. In terms of estimates, we are very focused on thinking about India as a very long term opportunity and hence we don’t really get too excited about change in estimates either upwards or downwards. It is a multiyear initiative this is barely even day one in Jeff’s term.
India remains a challenging market. I mean you look at how easy a lot of incumbents thought it might be to do business here. How easy did you think it was going to be to do business here?
I never thought it was easy. I was ready for the challenge.
You were ready for the challenge, but what has the challenged been even in terms of the numbers what did you think you would do at the end of five years and have you met those targets?
Again, we are not a company that gets too obsessed about as we call then outputs. We are a company that obsesses about what elements of customer experiences do we want to drive. On those dimensions are primary focus has been how do we offer massive selection to customers, provide great value, so that they can afford to buy more and provide great convenience so that they can get their items shipped fast. On all those dimensions we are very excited about the progress we have made. You have to have that long-term orientedness to invest that is what we are doing. So this short-term estimate reports don’t really worry me.
What are the numbers that you are working with? What do you think the market is going to get to in the next five to six years? What are some of your internal estimates and how big e-commerce will be here?
I don’t know and I don’t care. The thinks that I care about is how much selection can be bring online for customers. How much of this selection is in stock, so that the customers can get it quickly. How do we provide customers a full suite of levers ranging from credit to equal monthly instalments, to no cost EMI, to buyback, to competitive pricing so that they get great value in buying the product. How much time would it take to reach their doorstep once they order the product and there we have targets, obviously things that we don’t share that are proprietary to us so, that we can ensure that no matter where the customer is in the corner or no matter where the small-medium business is they can sell anything or buy anything online.
You are also a part of the market and while you will push towards leadership in that market. The largest player Flipkart is in talks with Walmart for a possible acquisition. Have you been in talks with Flipkart as well at any point of time, even in a last four and a half years?
We don’t really comment on rumours and speculations.
When you guys were starting out four and a half years back what was the thinking around how you are going to tackle this market? Was there a thought of forging partnerships with certain incumbents and then growing the pie or was it just about let us just go in on our own and what was the playbook?
We have done pretty well in becoming a leader through our organic strategy, so it have just worked so well for us that we are very happy to have the position that we have today. What we have done is we have come up with a lot of innovations that allows us to partner with a right kind of ecosystem players. For example I have space, is the great product that we invented that allows any local shopkeeper to plug in into our ecosystem network and they deliver products on our behalf. They act as pick-up points. Today we have 17,500 such points in 225 cities which is a massive network.
We are very happy with our organic strategy so far. We have made some investments in startup. Shoppers Stop is an example where we have made investment. It is a very specific investments that allow us to serve our customers better.
Where is the Shoppers Stop partnership going apart from bringing some of their fashion catalogue online which is an area where Flipkart and Myntra as a combined entity were far ahead of Amazon, what else can we expect going forward?
As a standalone market place we are the largest fashion site, not as an aggregation of multiple sites. Shoppers Stop is a great win-win partnership that allows Shoppers Stop selection to get access to Amazon customers. It is very early, we are very laser focused on providing customers access to selection.
Let me complete that loop of conversation around Walmart. You will not comment on whether you ever had a conversation with Flipkart, whether there is an issue of a breakup fee and so on and so forth. If the deal between Flipkart and Walmart were to go through, how would you and I refuse to believe that you haven’t discussed with your leadership here in India and even outside India, the team that sits out of Seattle, what the ramifications of that will be for business for Amazon here in India?
It is great for India. E-commerce is so early that you need a lot of investment to make e-Commerce what it should be in a diverse country like India. So, in my opinion the more investment that flows in the better it is. At such an early stage you want as much investment that can flow in, whether we do it ourselves or whether the ecosystem does it with us, at the end of the day we want India to be thriving online market place and more the investment the merrier.
What have been some of your investments or some of yours strategy of building out the blocks or the foundation of e-commerce here in India that has put you on a faster trajectory of growth than Flipkart and some of the other incumbents in the context of what Walmart’s possible alliance with Flipkart might give Flipkart and that entity here in India in terms of depth and know how in terms of building out those supply chains, if that was, what was lacking?
We haven’t heard customers anywhere in the world say offer me less selection, charge me more for it and please deliver it slowly. We put all our energy behind innovations, to add more selections, to provide greater value and to make it more and more convenient. In each of these pillars you have a lot of work to do.
What have we done to add more selection? We have invested lot of time and effort to enable small medium businesses whether it is through our initiative of Chai Kart or Amazon Tatkal, that actually brought sellers online, taught them how to sell online and bring selection online. When I look at value, we have built a great market place that allows sellers to use different fulfilment channels like Easyship, fulfilment by Amazon and each of these products remove cost from their P&L and allows them to offer greater value to customers.
When I look at convenience – Prime is our big investment in convenience. In fact Jeff called out as India having the best debut year for Prime across all countries ever in the history of Amazon. So, we are very excited, we have millions of Prime members today in India who are enjoying the convenience.
Let us also talk about Amazon Now, which is your product around delivery of grocery and other daily needs so to speak. How fast is Amazon Now growing, how much is it contributing to your overall revenue as a percentage share and where to do you see that vertical developing?
Amazon Now is a service available only in four cities that allows customers to get two hour delivery of kind of things that they would miss or want at last minute. Grocery is one of them, that is not the only one. We keep adding more selection to it. We also hook up other large retailers like Big Bazaar or More and others so that customers can shop their selection as well. Our focus with Amazon Now has been to ensure that we can provide a great experience, it has not been to grow that to be very large. We are very patient with it. It is something that we continue to test in these four cities, we continue to play around with the pin codes, the density and so on. So, I wouldn’t really think about Amazon Now as let us get it big fast initiative. It is a very specific investment that we have so that we can make it work well.
It is going to be restricted to these four cities over this calendar year?
We are focused on these four cities and when we feel good about it, that would be the time to think about how to expand it.
How does Amazon Now tie in with the Prime Pantry service? Pantry is available in a lot more cities, right?
Amazon Pantry is a different service, it has nothing to do with Amazon Now. Amazon Pantry allows you to buy everyday non-perishable grocery and other essentials that you would like to stock up for the week or for the month at the lowest price.
Aren’t there synergies between these two businesses?
Yes but one is based on convenience, it allows you to get to our delivery where you don’t want to wait and the other is you are willing to wait but you care more about price. So, it allows you to get the cheapest because it allows us to do a lot more optimisation around the time that you are willing to wait so that we can offer better prices to you. Amazon Pantry is doing extremely well, we are in 32 cities and we see customer’s especially Prime members use it very often.
You spoke of tying in to the networks of Big Bazaar and I believe you also have partnership with Modern Bazar and Hypercity, what is the nature of those partnerships? I also read somewhere that eventually the idea is to earn enough on commissions from some of these larger players to be able to bring down the pricing for your consumers to a greater extent?
They are sellers on our Amazon Now platform that provide customers with a choice to shop with them and to be able to get their items delivered in two hours. So, they are great partners and they get access to this convenience minded customer from the comfort of their home and uses our logistics network to deliver to them. So, it is like any other seller on our market place, we get a seller commission and we offer the service to our customers.
Let us focus on the B2B side of the business that you are looking to build out. Amazon global seller program and the B2B market place which you have said might actually become bigger business for you then the B2C business for you out of India?
It allows any small entrepreneur or manufacturer in India to build awesome products and sell them anywhere in the world using our global market place. We today have 32,000 sellers, most of them 80% of them are in the really lower tier cities who are actually selling 90 million plus items in 11 market places. So, I look at global selling as our solution to Make in India global at scale.
Amazon business is a completely separately initiative that allows businesses to buy from other businesses. So, they can come to the Amazon.in website they could sign up as a business and they could shop from other businesses so that they can get their GST invoice, they could get bulk pricing, and they could get quantity discounts so think of it as a market place for businesses.
In terms of Amazon Pay which is another iteration that you have launched. What was the rationale behind launching a pay option and really is it to increase stickiness on to Amazon in a certain sense? Also you have expanded Amazon pay for other merchants to be able to use, so I can use it on BookMyShow, I can use it to book food through Freshmenu and so on and so forth? What is the rationale of doing that really and I know you will be wary it of calling it a wallet but how is it any different?
Primary focus of Amazon pay is to remove payment friction on Amazon so that customers on Amazon find paying as a most convenient way. Amazon Pay does have a wallet in it so depositing money in the wallet is the most convenient way for customers on Amazon to pay. It is natural for us to say that why not let customers take their payment experience wherever they go. So, you would continue to see us invest in having Amazon customers take their payment experience wherever they go.
How many merchant partnerships do you have on Amazon Pay right now and are you looking actively to expand that merchant network for Amazon Pay?
This is very early for Amazon Pay. I think you should expect Amazon Pay to be available to customers no matter where they pay.
There has been certain experiments with this right, so Ola has tried to do it with Ola Money as well. But we haven’t seen these moves out as seamlessly and as easily correct and what is then the strategy for putting in time effort into building out Amazon Pay to that extend when we already have a lot of incumbent, wallets we have Phone-Pe that Flipkart has which is a separate app altogether are you looking to spin off then Amazon Pay into a separate app at any point of time?
It doesn’t matter and a separate app doesn’t increase your likelihood of success. It is a payment experience that customers enjoy. We know for a fact that Amazon Pay customers have a far greater convenience on Amazon as compared to other payment methods that they use. We are getting the same feedback from the merchants that use it that customers convert far better and they have far better customer experience. So it is very natural for us to continue to expand where it is accepted.
In fact we have launched more categories for customers, they can use recharges, they can pay their bills, with Amazon Pay they can buy their flight tickets, and book movie tickets and so we are expanding the use case and people can use for it. As I said it is very early, the question of relevancy is valid for any of the options that we have talked about. You are talking about like toddlers day one. The baby has not even started breathing, so it is just so early for payments in India.
Tell us about Alexa and the conversational commerce or the voice commerce story here in India?
We have 15,000 skills in Alexa today in just 60 days since it launched, it is like skill every 90 minutes. There are skills all the way from Bollywood trivia to Cricket scores to checking your PNR status from Indian railways, to devotional bhajan’s, to puja’s, to playing Tambola. Alexa is getting smarter, she understands Indian accents, you can say Alexa order some atta and she would just go to Amazon and charge your Amazon Pay account and order atta for you. It is just changing how shopping would happen.
In terms of investments in particular for India as far as Video is concerned, what might those be?
A: We have 10 more originals coming up, we have Inside Edge which has been a great success for us, we launched the second edition of that. So, we have quite a few originals – 10 more lined up for this year.
Can you give us a sense of the numbers, what is the kind of investment that is going into this?
We don’t share investment in dollars but it is something that we are investing in because we truly believe that digital content consumption in India would increase significantly. I think we have a great opportunity for years to have great stories get eyeballs.
There is report that Amazon India is developing a light website or browser, what can we expect as far as this browser is concerned?
A: We are always doing experiments to serve customers better and this is a browser that allows a low bandwidth usage, low footprint with faster speeds and it is designed for emerging markets.
It is being built by the technology team at Amazon India?
It is built by the team at Amazon not necessarily in India but the team that is focused on emerging markets.
If you have to look at your journey at Amazon, what are some of the projects, stuff that you tried and didn’t work and what were the learnings therefore from that?
Very early I was part of the market place team at Amazon that was trying to allow third party sellers to sell alongside Amazon Retail, this was way back 20 years ago and we tried multiple times and it didn’t work. It failed three times. We had Amazon Auctions, then we had Amazon zShops. Before Amazon market place as you know today, we actually had three tries. It taught us that we should be flexible on the strategy but very persistent on the vision and who knew that that invention would allow us to launch India. It is a good lesson to have. Many people are sometimes flexible on their vision but persistent on how they go about it.
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