The Indian shopper may prove to be the biggest test for Amazon’s famed Prime programme.
The online marketplace launched its Prime membership programme in more than 100 Indian cities on Tuesday, offering one-day and two-day delivery on lakhs of products for an initial fixed price of Rs.499. Apart from fast delivery, Prime members will get early access to products in the Lightning Deals category every day. They will also get exclusive deals from select brands and sellers. Amazon said it will also offer video content later under Prime, though it didn’t disclose its proposed launch date.
If Amazon can convince even a meaningful fraction of the 50-60 million online shoppers in India to sign up for Prime, it may offer hope for the entire online retail business, which is desperately trying to wean shoppers off discounts.
Prime has become one of the most important sales growth drivers for Amazon in the US where it was launched in 2005. The service, which is now available in 11 countries, helps boost customer loyalty; shoppers are also likely to increase their spending on Amazon after signing up for Prime.
Indian shoppers, however, have shown they want more than just fast delivery from e-commerce firms.
Currently, India’s $12 billion-plus online retail business is driven by deep discounts and extensive advertising. While other factors such as a wide product selection and convenience of getting orders delivered at home help, customers don’t seem to be too interested in buying online if discounts are pulled. For example, sales at all online retailers in the June quarter are estimated to have been sluggish because new foreign direct investment rules and a cash crunch prevented e-commerce firms from discounting extensively.
For years, e-commerce entrepreneurs and investors have said that once Indian customers are hooked to the extensive product assortment and convenience of shopping online in a country where the reach of organised retail is limited, they will be willing to pay full-price or near-full-price for products.
But that hasn’t materialised. The only thing that seems to have attracted Indian shoppers is deep discounts.
Amazon rival Flipkart has been offering its own version of Prime called Flipkart First for more than two years. However, Flipkart hasn’t put its weight behind the service and, as a result, Flipkart First isn’t a major contributor to the company’s growth.
Prime is likely to be a major upgrade on Flipkart’s service, given Amazon’s massive investments in building warehouses across the country, technology expertise and its large delivery workforce.
Yet the core customer proposition of Prime—great service—will be tested in a country of deal-seekers.
No surprise then that Amazon has already included early access to daily deals for Prime members in addition to fast delivery.