We strongly believe FDI is good for the ecosystem

Written by Anand J | Sayan Chakraborty | Updated: Jun 11 2014, 07:28am hrs
The $75-billion e-commerce giant Amazon has completed a year of marketplace operations in India. Its presence has started to enforce consolidation of the e-tailing industry in the country. Amit Agarwal, vice-president and country manager, Amazon India, tells FEs Anand J and Sayan Chakraborty about the lessons learnt during this period, strategies for growth and the need for FDI in e-commerce. Excerpts:

Amazon has completed a year of marketplace operations in India. How do you see the experience

Amazons mission statement is to build the earths most customer-centric company. It allows us to identify large areas where we believe we can provide significant customer differentiation. Amazon has been the inventor of cloud computing, which has nothing to do with e-commerce. Kindle is hardware. It is about large unserved areas where we believe we can bring in our skill-sets to create a different experience. Our vision for our global company is that we want to enable customers to find, discover and buy anything online. We start with customer experience and work backwards. Weve seen significant investments in the last 11 months; outputs are exciting and the growth is beyond our wildest dreams.

What is your growth philosophy

We believe if we create a great customer experience, we will get a lot of traffic. When we get a lot of traffic, it will be attractive to a lot of sellers, and when sellers get attracted, they bring in a lot of selection. Selection further improves customer experience and this is our flywheel that we try to spin faster all the time. When we do it well, it drives growth and drives lower cost structure for the entire ecosystem, whether it is transportation or seller cost or vendor cost. This lower cost gets passed on to the customer and this forms the secondary flywheel. These flywheels were drawn on a napkin by Jeff Bezos (Amazon founder) 15 years ago. We created our own warehouses and logistics networks in Mumbai and Bangalore, and partnered with carriers to build that whole ecosystem of delivery.

How fast are you expanding the one-day delivery programme

We launched the two-day delivery guarantee last year, we improved it to one-day guarantee delivery and we are offering it in 20-plus cities now. We also have the same day delivery in Mumbai, Bangalore and the surrounding places. While one-day delivery is hard, it is harder to make it work for a larger selection. We have more than 2.4 lakh products eligible for one-day delivery. More than 60% of our demand is eligible for the next day delivery.

When you allow sellers to self-register on the platform, how do you identify bad apples

Self service registration (SSR) opened the floodgates. We said anybody can come and sell without even telling us. People say it is going to impact quality. Over the last 18 years, we have built sophisticated processes and algorithms that allow us to detect abuse. Sellers go through only when we are convinced that they are good and able. The reasons they are not let through could be capabilities, abuse or whatever. Thats our secret sauce: the ability to build the earths biggest selection without compromising on customer experience.

The industry is witnessing consolidation. Do you think you are a bit late in entering the market

I think we are very early, going by the way the industry is moving. I would have said this even a year later. More customers will come online in the next two or three years than the number who have shopped online till now. Amazon looks for things that would not change ever. We know customers will always want massive selections at low prices at their convenience. So there is more invention waiting to happen than we have ever seen.

Flipkart and Snapdeal, the other two big players, have invested close to $500 million over the past one year. Has Amazon made similar investments in India

We cannot reveal what we are investing. We are here for the long term. And when you are taking a bet on what something would look like in the next few decades, you cannot take a conservative view on investments. You can only take an extremely aggressive view. We will invest what it takes to make sure Amazon is Indias most customer-oriented company.

What strategic decisions are you taking to expand in India

The Amazon way of operating is that we start with the customer and work backwards and think what he needs. Sometimes, it takes many years to get something right and believe there is value proposition here. There is no sequencing on what should come first. We are looking at the long-term outlook. We are not worried at movements of three to six months. My job is to speak for the consumer and think why does an idea make sense. A lot of our focus is on defect removal. The team is expected to do the five why analysis. Only when you ask why five times do you get to the root cause. To a customer complaint about a poor product, the immediate reaction is to fire the seller. But if we look at the root cause we might find that it may not be the sellers problem alone and we fix that problem.

There are a lot of interesting ideas that we anticipate customers will benefit from. We launched a programme called Scheduled Delivery in Mumbai. Customers could tell us what time they want the product to be delivered at their place, to drive productivity and reliability. We launched a pilot in Bangalore for kirana drop-off and pick-up points. We are trying out different things and 90% of these ideas will fail. But 10% would become gems and one such initiative is the SMB accelerator programme that we piloted in Bangaloreit has worked and is being expanded to other cities. The SMB accelerator programme acknowledges there is a gap in seller capabilities. In 10-plus cities, our teams work with small shops in digitising their catalogue and help them get online. In the last 11 months, we have launched 21 categories, we should continue to grow at a pace as insane.

How much of the parent companys technology can be transplanted into India

Amazon has everythingfrom customer reviews to a personalised experience. It would be foolish for us not to take everything that Amazon has to India. There are a lot of innovations that customers in India automatically benefit from. But we dont have an SMB accelerator programme anywhere else. We dont have a kirana pick-up and drop-off anywhere else. We dont do EMIs, badging of products or Easy Ship, the way it is in India; so there are many areas that we are inventing by listening to customers and anticipating their behaviour. People in the US would also prefer Easy Ship and this is how our global innovation flywheel works. Some local unit of Amazon innovates and adds that to the global flywheel. I am hoping, for instance, that the SMB accelerator might help our Chinese unit.

Of all the geographies Amazon has worked in, how challenging is the Indian market

We had a viewpoint 11 months ago that customers in India are similar to global customers and the past months have confirmed this. But from an execution perspective, to translate this strategy into action has been harder. The seller landscape, the logistics landscape, the ecosystemthey are not as mature as in other geographies. So we had to work harder so that our customers did not feel that.

We strongly believe that FDI is good for the ecosystem. There are plenty of manufacturers who dont see the light of the day because they are unable to carry inventory. So if Amazon is one of the buyers, we will buy and make it available on the platform to bring more choice into the customer experience.

Any acquisition plans

We are very happy with the momentum but I cannot speculate on what we may or may not do.

Has the presence of competitors forced you to invest more in India than you would otherwise have

In a long-term strategy, you want to be the benchmark of customer experience. Whenever we get into an initiative we have invested as much as required. We see what is happening around us and we cannot not be competitor aware. We get inspired by many things people around us do.

What kind of customer feedback have you been getting in India

We get feedback every day. The good part of running an online presence is that every customer interaction generates feedback. You dont need customers to speak. You see what customers are looking at, when they are leaving the page, why the conversion is lower than yesterday. That is feedback. Sometimes you get fixated about what customers are shouting about but the best feedback comes from what they are not shouting about.

And your mobile platform

We did not anticipate mobile to grow so rapidly. We try not to extrapolate too many things over what we see during a short time-period. We need strong correlations over many, many quarters to predict a trend.