Amazon ties up with Storeking for offline push
Bengaluru: Amazon India has increased its offline shopping initiative to more than 1,000 outlets in an attempt to increase its reach in small towns across the Indian hinterland.
Amazon launched its offline shopping initiative called Udaan in late 2014. Under this initiative, the company selects and trains local entrepreneurs in smaller cities and towns as well as in pockets of metros where Internet connections aren’t easily available.
These local entrepreneurs run physical outlets and persuade wary consumers to overcome their mistrust of online shopping and buy phones, apparel and other products on the company’s site. Amazon delivers the products to these outlets with the local entrepreneur keeping a cut of every sale.
Amazon didn’t disclose how many new shoppers it has added through this initiative so far.
The move has helped the company extend its reach in places where most online retailers have no presence, say analysts.
For e-commerce companies, reaching people and building a brand in rural India poses a challenge because of poor Intern\et connections, language barriers and a general mistrust of online shopping. Yet, it is also important as semi-urban and rural areas will contribute a majority of new Internet users in India over the next five years.
“With first-time Internet users, there is a lot of anxiety about online shopping and whether they will be able to successfully finish transactions,” said Kishore Thota, head of consumer marketing, Amazon India. “With Udaan, we build trust with first-time shoppers who will then hopefully come back and shop on Amazon by themselves. We have seen that happen with quite a few of the users who have shopped via Udaan.”
Amazon India has also signed an exclusive partnership with e-commerce start-up Storeking, which has a presence in more than 10,000 rural outlets across south India. Storeking offers tens of thousands of products via its tablets installed at retail outlets and so-called corner or kirana stores in rural areas. It offers product information and shopping services in regional languages, a key attraction for rural shoppers.
“Storeking has a very wide rural presence in south India and it will help us tap a new customer base. They also have existing logistics capabilities, which we will use to deliver products,” Thota said.
Amazon’s Udaan initiative and its partnership with Storeking is the latest instance of the company’s successful localization in India. India is the most important new market for Amazon, which lost out in China to Alibaba Group. Analysts say Amazon didn’t understand the Chinese market well enough and didn’t do enough to localize its strategy and services there.
In India, the company has moved more nimbly and catered to local tastes rather than trying to force customers to adapt to its ways.
Amazon offered cash on delivery, the preferred medium of payment of most Indian online shoppers, from the day of its launch in June 2013; it struck a partnership with India Post to reach remote areas of the country; it has tied up with kirana stores, the dominant retail format in India, and others to launch a grocery delivery service.
“If you look at the consumer goods companies like HUL (Hindustan Unilever Ltd) and P&G (Procter & Gamble), they also expanded to rural areas for growth after the urban market was saturated,” said Harish H.V., partner, Grant Thornton India. “But with e-commerce companies, they have to do it a couple of decades faster than the consumer goods companies did. Rural is also very difficult to crack. It remains to be seen how Amazon does the logistics. Will they have to create a new supply chain than the consumer goods companies and introduce new products to rural markets?”