Do You Want To Succeed In Emerging Markets? Customize Your Offering Or Change Your Business Model

Just read a great article on how Amazon is growing faster and outcompeting local e-commerce giants in India by Vijay Govindarajan and Anita Warren in Harvard Business Review titled How Amazon Adapted Its Business Model to India

So these are 3 big guns in the e-commerce sector in India in 2016:

Amazon

Amazon India

Flipkart

Flipkart

Snapdeal

snapdeal

As Vijay Govindarajan and Anita Warren point out, Amazon did not come into India and succeed by doing what helped it make the giant it is in USA.

When Amazon decided to enter the Indian e-commerce market, it was clear from the outset that something would have to give. That something was the very business model that had made Amazon an internet powerhouse in the U.S.

Especially Amazon being a foreign entity it had to play under different rules. Now the advantages and disadvantages that Amazon faced in India are highlighted as follows:

The good news: included a very young populace — more than 65% under age 35 — rising levels of disposable income, and ubiquitous cell phone ownership (80% of the population, by one estimate).

The bad news: 67% of the population lives in rural areas characterized by an underdeveloped infrastructure. Only about 35% of India’s population is connected to the internet. Cash, not credit cards or checking accounts, is still the rule. And, determined to protect its own, India enacted a rigid FDI policy restricting foreign multibrand retailers from selling directly to consumers online. That meant any venture would basically be a third-party seller for Indian-made products.

After launching India in 2013, Amazon India went about implementing it’s roadmap by doing the following things:

  • Educated the small-business owners using “Amazon Chai Cart” where it took it’s marketing people to the door steps of the small business owners to make them a part of it’s platform
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  • Created “Amazon Tatkal“- a self-described “studio on wheels” that provides a suite of launch services, such as registration, imaging, cataloging, and sales training.
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  • In U.S.A, Amazon uses a centralized shipping platform, which it calls “Fulfillment by Amazon (FBA)“, to store and distribute the products it sells. Sellers send their goods to Amazon’s fulfillment centers and pay a fee for the corporation to store, pick, pack, and ship their wares. They implemented the same in India as well.
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  • Created “Easy Ship” whereby Amazon couriers pick up packaged goods from a seller’s place of business and deliver them to consumers.
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  • Created “Seller Flex” whereby vendors designate a section of their own warehouses for products to be sold on Amazon.in, and Amazon coordinates the delivery logistics helping speeding up delivery.
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  • Inked contracts with a number of major delivery services in the country, including India Post and cargo airline Blue Dart. Using bike and car couriers where needed. In 2015, they also set up a subsidiary, “Amazon Transportation Services Private Limited“, to augment delivery.
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  • By making the small business owners especially in rural India as it’s partners, Amazon helps locals with no internet access go to the local store and use the owner’s internet connection to browse and select goods from Amazon.in. Then the store owners record their orders, alert customers when their products are delivered to the store, collect the cash payment, and pass along the money — minus a handling fee — to Amazon.
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    You should check out the whole article as a quick read into how a western business (albeit a very big one with deep pockets) can make it’s mark in India or other emerging markets.

    Of course these are still early years and no one is yet an outright winner or loser and India is big enough to have multiple e-commerce players ply their trade.

    Image sources: Amazon.in, Flipkart.com, Snapdeal.com

    Author: Venkata Gandikota

    Venkata has more than 13 years of technical engineering, research, ideation, strategy and business modeling experience. Based on his experience with the Indian market and realizing also the need for affordable & sustainable solutions for Finland and other European markets, he started The Nordic Frugal Innovation Society in late 2013 with 2 colleagues. By organizing ideation workshops and 2 major conferences involving Cities, Universities, and businesses he started to mainstream the concept in Finland and the Nordics. Gandikota has also written several articles focusing on frugal innovations in the Finnish media. He has also been helping Finnish businesses in India as CEO of Indianeer Consulting and gives guest lectures at JAMK University of Applied Sciences in Jyväskylä. He has a Bachelors in Chemical Engineering from India and a Masters in Environmental Engineering from USA.