How Amazon cracked the e-commerce riddle in India

E-commerce giant Amazon completed 10 years in India in June. Although the company entered the Indian markets much after home-grown ecommerce platforms like Flipkart, Snapdeal, IndiaMART, etc, it has still become a major player in the space. Abhinav Singh, Vice President, Customer Fulfilment, Supply Chain & Amazon Transportation Services, Amazon India, believes that their success is driven by understanding the needs of the Indian consumer, the growth of the digital infrastructure in India along with key partnerships with stakeholders of the Indian logistics network like Railways and India Post.

Digital infrastructure's growth, e-commerce’s growth

In a conversation with Business Today, Singh said, “This growth is on the back of the nation itself growing, digitisation, which is becoming a big thing: internet penetration, and smartphone penetration, among other factors have greatly contributed.”

As per data provided by the company, Amazon in India started with one fulfilment centre in Bhiwandi, Maharashtra, which had 0.22 million cubic feet of storage. Now, the e-commerce giant boasts of fulfilment centres across 15 states with 43 million cubic feet of storage. Moreover, the company has sortation centres in 19 states with 2.3 million square feet of ground coverage. Overall, Amazon India has close to 2,000 delivery stations and Delivery Service Partners in more than 750 cities. Also, to aid the middle mile network, they have more than 600 trucking partners. In January this year, Amazon launched its air fleet in India which has two aircraft, the Boeing 737-800. The e-commerce company also works with airline partners to carry packages in the belly of passenger planes.

Strategic partnerships with India Post, Railways

The VP credited strategic partnerships with several stakeholders for expansion of the company's network. He explained, “We have very strong relationships and partnerships with the Indian Railways and career providers like India Post and other courier companies. So quite honestly, over the last 10 years, we've been able to build a network from the ground up to serve millions of customers.”

The e-commerce giant announced during Smbhav 2023, its flagship annual event in India that it has furthered its partnership with Indian Railways to be able to use the high speed, high-capacity Direct Freight Corridors (DFC) for logistics across the country, making it the first e-commerce player to have access to the DFC.

The company's CEO Andy Jassy spoke with Prime Minister Narendra Modi earlier this year and discussed Amazon's partnership with the state's logistics partners, Singh noted, "When Shri Modi met Andy in the US, Prime Minister Modi spoke about the importance of partnering with the Indian postal service and railways."

Helping ONDC with logistics

The VP also added that Amazon is partnering with ONDC to help the latter build critical logistics support.

"We are working with ONDC to integrate our logistics services, where we provide our logistics services to any seller on the ONDC. And they can use the same reliable service that our customers have come to like and rely upon to serve their own customers," he said.

What's next for Amazon in India?

Singh noted that the company is now focusing on faster delivery and its groceries business in the next leg of Amazon in India.

"We have launched sub-same-day delivery, which is basically less than the same day in 52 cities. And we are growing that offering. We have a very meaningful fresh business, which is fresh fruits, vegetables, and groceries, which is slotted for our delivery across many cities. So yes, same-day and sub-same-day are very real, and for Prime customers, it’s free," he said.

Financials

As per regulatory filings of FY22, Amazon Seller Services, which runs the Amazon India marketplace, reported a 32 per cent jump in overall revenue to Rs 21,633 crore on a standalone basis. The company’s revenue from operations grew to Rs 21,462 crore in FY22 from Rs 16,200 crore in the year-ago period.

Moreover, the ecommerce marketplace also managed to cut net losses by almost 23 per cent to Rs 3,649 crore in FY22 from a loss of Rs 4,748 crore in FY21.

The e-commerce marketplace unit of Amazon India, competes mainly with Walmart-owned Flipkart. These ecommerce companies generate revenues from platform fees collected from sellers, shipping services, subscriptions, advertising, etc.

Amazon’s operations in India are not limited to ecommerce but also span across Amazon Web Services, Amazon Payments, etc. The global brand has around 1 lakh employees in India and has invested $ 11 billion across verticals. CEO Andy Jassy noted that the organisation would invest $ 15 billion more by FY 2030.

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