India could become Amazon’s largest market after the US: Amit Agarwal

Amazon India country head Amit Agarwal on the importance of local market, new rules governing FDI in e-commerce firms and investment plans

Mihir Dalal
Updated20 May 2016
Amazon&#8217;s crorepati club&#8212;sellers who do sales of more than `1 crore&#8212;has gone up more than 130% over last year, Amit Agarwal says. Photo: Hemant Mishra/Mint<br />
Amazon&#8217;s crorepati club&#8212;sellers who do sales of more than `1 crore&#8212;has gone up more than 130% over last year, Amit Agarwal says. Photo: Hemant Mishra/Mint

In an interview, Amazon India country head Amit Agarwal spoke about the importance of the local market to Inc., new rules governing foreign direct investment (FDI) in e-commerce firms and investment plans. “We’re as emboldened as ever to invest whatever it takes to fulfil our ambition,” he said. Edited excerpts:

Now, how important is India to Amazon globally?

If you look back, the fact that we came in and invested so aggressively shows that over the long-term we always knew it’s important. What has happened is we’ve seen significant momentum and there’s a lot more conviction that what we’re doing is delighting customers. In terms of new customers, India is already contributing a large number. If we execute well, India should be Amazon’s largest geography after the US. Jeff (Bezos) has talked about India in so many different forums, shareholder letters and others. We’re as emboldened as ever to invest whatever it takes to fulfil our ambition.

You are very close to exceeding the $2 billion promised by Jeff Bezos in July 2014.

We’ve never been constrained by an investment cheque. The moment you drive actions on the basis of a number, you will not do what is right for the long-term. Our long-term ambition is to transform how India buys and sells. To do that, we will thoughtfully invest whatever it takes to do that.

Has your growth in India matched your expectations when you launched in June 2013?

Three years ago, if anyone had told us this is where we are going to be, we would have been very, very surprised in the sense that we have been able to get customer adoption and traction much faster than we imagined. We knew it was a big market and we have a long-term outlook, but we didn’t imagine we would get so big so quickly. We also believed the Indian customer isn’t different from customers elsewhere in that they would value in-stock selection, low prices and fast and reliable delivery. Now, we have the data to prove that. Sellers, we thought, will value fair and transparent treatment, sales, reliability of the platform, and that’s been proven true. So at a high level, the momentum and progress we’ve seen has surpassed our expectations.

How do the new FDI regulations affect Amazon?

I welcome the government’s intention to bring clarifications to the sector. The fact that they’ve brought things like logistics, warehousing and other service under the new laws is hugely exciting. Our model has been based on such services. Each of these services helps us achieve our core principles of wide selection, low prices and fast delivery. The new regulations motivate us to invest even more.

There are two regulations that will affect Amazon significantly. One, that a single seller cannot account for more than 25% of Amazon’s sales. Two, Amazon cannot affect prices on its sellers. What is Amazon doing about these?

The part about large sellers having to modulate their sales—we’ve put in place a process to give data to our large sellers about how their units are faring so that they can decide how to manage their business... One of the things that is important to understand about pricing is that the core pricing strategy is sellers pricing their items. We as a marketplace don’t price. The way we drive prices down is (by investing in infrastructure and removing inefficiencies in the system). Occasionally we do promotions on our platform which help not only consumers but also every offline seller that is participating. When you’re a marketplace and you’re trying to drive awareness in a very nascent environment, you would have occasional promotions and events, and we will figure out what’s the right, allowed method to do it. Our goal is always to be compliant with laws.

There’s a perception that the Indian seller ecosystem is not evolved enough for a true marketplace to thrive and online retailers will have to rely on a few large sellers for some time to come.

We have more than 85,000 sellers on our platform, and these range from mom-and-pop stores to large sellers. Our crorepati club—the number of sellers who do sales of more than 1 crore—has gone up more than 130% over last year. There are thousands of members in that club. The number of active sellers, the amount of time it takes for a seller to make the first sale and other metrics are healthy and growing. India has always been a country of entrepreneurs. You just need to give them the right tools and technology.

Cloudtail, a joint venture between Amazon and Catamaran Ventures, is the largest seller on your platform. Does it account for a large and disproportionate part of your business?

I don’t know about that statement. As I said, we have more than 85,000 sellers on our platform and these range from small to large sellers. Pretty much every large seller that you’re aware of in India is a seller on Amazon.

What innovations have you exported from here?

Seller Flex, Easy Ship, Amazon pick-up points (which allow small mom-and-pop stores to indicate to us that they have space and could act as pick-up points). Amazon Now and Prime Now are working closely together. We’ve worked a lot on reducing page sizes and latency in loading and every time we do that, it helps our other teams. We make the Amazon app better everywhere. We’ve helped launch mobile-only accounts. There are many such initiatives.

You launched your hyperlocal grocery ordering app, Kirana Now, in February. How is it doing?

It allows Amazon customers to buy 5,000-6,000 everyday essentials in less than two hours. It uses technology to wire up retailers in the locality with customers. We have sellers on the platform that are kirana (neighbourhood grocery) stores. Our hope is that we can create the largest, branded kirana network in India. We also have known, large-format retailers. We’ve used technology to integrate with them. The app is doing extremely well. The last three months it’s grown three times. We will continue to grow selection. It’s only in Bengaluru now, and we should expand to more cities.

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