Bengaluru: Amazon India, Amazon.com Inc.’s local unit has launched its global Prime membership programme in more than 100 cities in the country, offering one-day and two-day delivery on lakhs of products for a fixed price of Rs.499 initially, as the company seeks to retain more customers and boost sales.
Amazon Seller Service Pvt. Ltd (Amazon India) will initially offer a free trial period of 60 days on Prime. Thereafter, for a limited period, the company will charge a discounted annual subscription fee of Rs.499, compared with the list price of Rs.999. In the US, Prime customers pay $99.
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. In the US, Prime’s video streaming service is the only major competitor to Netflix.
“Prime is great for both customers and sellers,” Amazon India country head Amit Agarwal said in an interview. “For customers, one-day and two-day delivery, which is something that they enjoy as an occasional indulgence, becomes an everyday experience as they shop for products on Amazon. For sellers, Fulfilment by Amazon (FBA) becomes even more attractive. FBA has helped sellers lower costs and increase sales. Now, all their products under FBA will be eligible for Prime. So, Prime will result in more sales for sellers who sign up for FBA.”
The launch of Prime may boost Amazon India’s growth by improving its customer retention rates.
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.
In June, Amazon said it will invest an additional $3 billion in India after its exhausted its earlier investment pledge of $2 billion, as it goes for the kill in the market share war with local rival Flipkart.
Currently, Amazon rival Flipkart offers its own version of Prime called Flipkart First. However, Flipkart hasn’t seen the kind of customer uptake it expected and Flipkart First isn’t a major contributor to the company’s growth, highlighting the difficulties in operating a programme successfully in a country that has poor infrastructure.
To ensure it can consistently deliver the services it promises under Prime, Amazon India has spent hundreds of millions of dollars on building infrastructure since its launch in June 2013. It has invested in some 27 warehouses (of which 22 are in operation currently) across the country, has the largest warehousing capacity among all online retailers in India and employs thousands of delivery workers. The company has also enrolled thousands of sellers under its FBA service, which helps Amazon gain operational control over inventory.
“Prime has been a phenomenal success for Amazon in the US and they are clearly looking to replicate it here,” said Harish H.V., partner at consultancy Grant Thornton. “It’s attractively priced but we’ll have to see how they expand it. Video, which is a big draw for consumers in the US, isn’t yet available here. But one thing is certain: rivals will have to react to this and up their game. That’s the nature of e-commerce competition.”