Prior to Amazon.in, Amazon already had thousands of employees in India performing customer service,
software development and back office functions.37 In addition, in February 2012, Diego Piacentini and Amazon’s VP for International Expansion, Amit Agarwal, led Amazon’s investment in Junglee.com, an online product review site that listed over 10 million products, toward the Indian market in 2012. Through the site, customers could compare reviews, pricing, and shipping details for each product listed.38 Piacentini and Agarwal were determined to formulate a strategy that would best leverage their learnings from nearly a decade of operations in China. Rather than making piecemeal investments over their first few years of operation, Piacentini and Agarwal decided to invest big from the start. They recognized that their competitors had a head start of five to nine years to adapt their businesses to the Indian market, and so Amazon needed to develop a competitive strategy.
Agarwal brought local knowledge and deep company experience to this endeavor. The Mumbai-born new Vice President and Country Manager for Amazon India had joined Amazon in 1999 after earning his computer science degrees at the Indian Institute of Technology-Kanpur and Stanford University. He rose through the ranks from software development at Amazon headquarters to Managing Director of Amazon’s Development Center in Bangalore and then “Shadow and Technical Advisor” to Bezos.39
After the launch of Amazon.in in June 2013, much of Amazon’s initial Indian investments went to its core strength in logistics, as the company learned to adjust to the difficulties of distribution in India. Just prior to the launch, Amazon had completed the construction of a 150,000-square-foot fulfillment center just outside Mumbai. It later built one of similar size in Bangalore to serve southern India. With so much of India’s retail space dominated by local mom and pop shops, Agarwal and Piacentini decided to offer a “Fulfillment by Amazon” program in which Amazon enabled sellers to store their products at Amazon distribution center and have Amazon handle the delivery for a fee. Eventually three out of every four orders on Amazon.in were fulfilled by Amazon.40
Agarwal and Piacentini decided to further differentiate Amazon from its Indian competitors by being the first e-tailer to offer next-day shipping for the orders it fulfilled. In order to compensate for the difficulty of locating addresses and to ensure timely delivery of its sellers’ products, Agarwal also added PIN code (postal codes similar to ZIP codes in the U.S.) and landmark fields on the delivery information page, reaching 21,000 PIN codes versus other retailers’ 12,000.41
Since Amazon would function solely as a marketplace in India, seller acquisition was a major priority for establishing market share. To attract domestic sellers across India, Piacentini and Agarwal offered sellers a promotion for a two-year membership agreement with the first year free of cost. After the first year, members were only required to pay Rs 499 ($8.27) per month in addition to Amazon’s commission charge of 4%-8% (4% for most electronics, 8% for watches and jewelry) and a Rs 10 ($0.17) “closing fee” for each transaction. Piacentini and Agarwal also stressed educating Indian sellers on Amazon’s platform and services. For small retailers with little to no online selling experience, Amazon offered a pilot service called “Mainstreaming Sellers/SMEs” to teach them how to transact online, catalogue their products, and accept online payments. In addition, sellers could utilize the “Fulfillment by Amazon” option to give responsibility for delivery to Amazon.42
In order to attract buyers from India’s growing number of Internet users, Piacentini and Agarwal offered multiple incentives for those who referred customers to or bought products from Amazon.in. In the beginning stages of operation in India, Amazon offered free shipping for the orders it fulfilled. It also offered permanent free shipping on all orders fulfilled by Amazon over Rs 499.43 Piacentini and Agarwal also introduced the Amazon Associates Program, which offered a commission to all online publishers (e.g. bloggers, businesses, authors, nonprofits, and personal websites) who directed their viewers to Amazon.in via a link to a “contextually relevant product.” If a purchase was made, the commission for referrals would
range between 5% for consumer electronics and 10% for most other product categories, such as books and movies, and would cover all purchases made by the referred customer.44 Piacentini and Agarwal also attracted buyers by replicating the cash-on-delivery option it had offered in China. In addition to online payment options such as credit cards, debit cards, and bank transfers, cash-on-delivery would allow Amazon customers to pay for their merchandise at the time of delivery. However, this option had tended to delay payments to Amazon up to one week.45
E-retailers in India appeared to be fighting to offer the largest selection of products at the lowest cost and with the fastest delivery times. Just after Amazon introduced next day delivery, Flipkart announced that it would be offering “In-a-Day Guarantee” delivery. Soon after, both companies began to offer same day delivery in a number of cities if ordered before a certain time.46
Amazon and its competitors had further attempted to differentiate themselves through unique mobile features and by entering exclusive distribution agreements with producers. For example, in February 2014, Flipkart signed an agreement with Motorola to sell its new phone, Moto G, only online through Flipkart’s site. In addition, Snapdeal agreed to be the sole Indian seller of Oplus Technology’s (Taiwanese) newest tablet in January 2014. Snapdeal co-founder and CEO Bahl stated that 90% of its product offerings were unique to Snapdeal, concentrating the most on the “unorganized segment in categories like apparel.”47 Snapdeal further differentiated itself by being the first to launch its site in both Hindi and Tamil.48
Amazon was also competing for market share among mobile users. According to Avendus Capital, India had 67 million smartphone users in 2013, a figure that could reach 382 million by 2016.49 As of 2014, Snapdeal claimed that 30% of its business came from smartphone users; eBay claimed 31%.50,51 To cater to this demand, most e-tailers had developed comprehensive mobile apps for their sites, even offering exclusive deals to those who made purchases on their phone. Moving into India’s fiscal year 2015 (April 1-March 31), some of Amazon’s competitors had expressed interest in acquiring a mobile technology enterprise in order to exploit this market opportunity.52
While Amazon waited for its rivals to take the lead on the e-tailing side for many years in India, the firm had entered China a decade earlier in 2004.