Case study #2

CHIP THE KART

Amazon Inc. has been considering an India market entry for some time,
although it has been skeptical of the adoption of credit cards and the
migration to online shopping in India. Meanwhile, a local start-up
company, ChipKart, has emerged, and created a strong, well-reputed
Indian e-shopping market. It overcame the reluctance to use credit cards
online through the simple innovation of accepting Cash on Delivery
(COD) for its merchandise. ChipKart trained the delivery & logistics team
to become a part of the sales process.
This innovation has awoken Jeff Bezos, CEO of Amazon Inc., to the
possibility of market potential in India. However, leery of engaging in an
early, head-on battle with ChipKart, Mr. Bezos decided that he would like
to know which are the right customer segments and product segments to
target for initial entry into the India market without arousing a
competitive battle with ChipKart early on.

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You have been hired as a Consultant to help Amazon decide on

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what direction to take. How will you go about it?

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Refer exhibits given below, that shall help you reach conclusion:

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EXHIBITS

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 m
er as
co
eH w
o.
rs e
ou urc
o
aC s
v i y re
ed d
ar stu
sh is
Th

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https://www.coursehero.com/file/64995172/Case-study-ChipKartdocx/
 ----------------------------------------------------------------------------------------------------

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co
According to Nielsen’s Global Connected Commerce Survey, about 83%

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consumers in India preferred using cash on delivery as a mode of
payment for online purchases.

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Consumers still dither to use credit cards due to online fraud risks.
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Factors that contribute COD Growth
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 Convenience
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 Familiarity with cash payments

 Less Credit Card Users

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 Lack of secure payment gateaways

 Fear of Online Scam

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According to Exhibits,

There are different purchasing trends among the different demographic

groups, and that those differences have significant strategic implications.

The 22-32 and 32-42 age customer segments have good credit card
penetration. However, the younger end of the spectrum appears to be
lower-price focused.

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 According to Exhibit C, the 22-32 age group seems to be purchasing a
larger amount than would be expected, by value.

According to Exhibit B and C

Both ChipKart and the overall market skew heavily toward older
segments, when transactions are measured by value rather than quantity.

In both cases, this suggests that the older population is buying more
items per order or more expensive items.

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Revenue= Number of Transactions X Average Price
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The highest-revenue categories are:

1. Mobiles, Camera & Computers

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2. Home Entertainment
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3. Clothing, Shoes & Jewelry

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 It might be challenging to set up cash on delivery (COD) initially. It

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requires finding, hiring, and training a network of delivery personnel,

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and setting up oversight to ensure respectable quality control.

 Cash on Delivery economics do not work for certain products
because there is a fixed shipping cost of Rs 50 which reduces the share
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of the transactions.
 Relative to online bank and credit card transactions, the
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transaction cost 2.5% of the transaction value.

 Looking at demographics, one can deduce that older (42+)
customer segments buy items more suitable for Cash on Delivery
because they are purchasing higher-value shipments on average, and are
much less likely to own credit cards.
 As a Consultant I would suggest Amazon to target younger
segments with cheaper items, and place an emphasis on high-volume
purchasing. It should allow only bank and credit card transactions.

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