Amazon.com, the world?s largest e-tailer, on Wednesday made its keenly anticipated move of entering the country?s $2-billion e-commerce market by launching its Indian marketplace platform. The $61-billion Seattle-based online giant’s choice of business model over the traditional inventory format follows the more profitable approach its global peers, such as eBay, have adopted in India. Besides, it falls in line with a new definition of India?s FDI policy, which came into effect on Wednesday.
In a conversation with FE on Wednesday, Greg Greeley, vice- president of international expansion at Amazon.com, said, ?Due to the FDI regulation, we cannot be a retailer in India. We operate in both formats ? as an inventory player and marketplace ?in other countries. If there is a change in regulations (in future), we will look at the inventory model. The FDI regulations do not affect our marketplace at all,? he said.
Most foreign funding in the e-commerce sector had gone to back-end companies as India does not allow FDI in the segment. While the new definition of ‘group company’, as per the ministry, would have clubbed the back-end and the front-end companies together, affecting the sourcing model, the market-place format will not be affected by this change as an aggregator only offers an IT service.
Amazon operates its marketplace models in 10 countries, including the US, Japan,Canada, France and the UK. Despite having 60% of the goods sold globally through its own inventory, Amazon has chosen the market-place model for India. At present there are more than 2 million third-party Amazon sellers globally. In India, Amazon has software development centres in Hyderabad, Bangalore and Chennai.
?The companies are moving to the market-place model in India on account of the FDI regulation as well as cash crunch. So this (marketplace model) is convenient for e-commerce players to register themselves as an IT company,? said an industry analyst who did not wish to be identified, adding that these are mostly short- term fixes for the industry.
Amazon is starting out with books, movies and TV shows in India while it will introduce additional categories, including mobile phones and cameras, in the coming weeks, the company said. Currently, it has more than 100 sellers on the platform and will be adding more every day. Amazon’s entry into India validates the marketplace business model that Snapdeal started 18 months ago, says its co-founder and CEO, Kunal Bahl. Global market-place e-tailer eBay, which has invested $50 million in Snapdeal this year, on Tuesday announced a partnership with the Indian marketplace player to cross-sell their products. ?This will strengthen our platform and bring in synergies. If a product is not available on Snapdeal and is available on eBay, the consumer will still be able to buy from Snapdeal,? Bahl told FE. In April, India?s e-commerce major Flipkart also moved from the inventory to the marketplace model. To start with, it onboarded 50 sellers dealing in books, media and consumer electronics.
Junglee.com, a price comparison website that Amazon acquired in early 2012, will continue to offer the services independently listing products outside of Amazon.com. The US-based online major, which started advertising on its website globally, will not be doing so India. Amazon in India is operated under Amazon Seller Services, an affiliate of the Nasdaq-listed firm.
?Amazon may not be able to differentiate (from competition) from day one, but price, product availability and customer service will decide who will gain market-share,? says Karthik Reddy, managing partner of the R100-crore seed funding firm Blume Ventures.