Name – Nandini Jaiswal Class – SYBMS

Roll no – 230 Subject - Economics

AMAZON

 HOW THEY ENTERED INDIA?

US online retail giant Amazon has made its first foray into India with launch of a
shopping website, Junglee.com, as it tests the waters for a possible full entry into the
nation's e-commerce market.

India's e-commerce business is set to boom as incomes and consumer demand climb
in a country of 1.2 billion people with a steadily ballooning middle class, analysts say.

Amazon's move, announced late last week, "is to get an insight into the Indian
market," Asheesh Raina, a principal research analyst at global consultancy Gartner,
told AFP.

"This market could be a game-changer for Amazon -- these e-commerce retailers

survive on volume. India with its large number of people could be a huge
opportunity," he said.

Junglee, which means "wild" in Hindi, is a modified version of the world's top online
retailer's shopping portal, allowing customers to search for different products and
compare prices.

It will offer over 12 million products from more than 14,000 Indian and global brands
-- but buyers must make their purchases through a network of third-party suppliers
either by ordering online or visiting them in person.

The set-up allows Amazon's Indian website to sidestep government rules forbidding
foreign multi-brand retailers from operating in India as it only directs shoppers to sites
rather than selling the products directly.

"It's a clever way of getting into the Indian market that works with the rules," Saloni
Nangia, president of Indian research consultancy Technopak, told AFP.

The government announced last month it would allow foreign multi-brand retailers
such as supermarkets into India but then did a U-turn over fears the move would hit
small family-run stores that dominate the retail landscape.
Analysts say they believe the government still wants to ease regulations to let in
multi-brand players but cannot say when it will happen.

Amazon, which has operations in neighbouring China, is aiming to give customers "a
single online starting point", Amazon.com vice president Amit Agarwal said last
Thursday.

"They can shop a wide selection of products sold by local and global retailers and
make informed purchasing decisions," Agarwal said.

The company did not reply to repeated requests by AFP for comment on its next step
in India.

Gartner's Raina said the move was a "low-cost way for Amazon to find out what the
Indian market is about --- build brand loyalty -- and hopefully when the retail
regulations loosen in India take their customers with them".

The launch of Junglee comes after Amazon said last month it was setting up its first
warehouses, known in its corporate parlance as "fulfilment centres", in India. The
warehouses allow Amazon to store products and ship them swiftly.

Some of Amazon's biggest competition in India will come from e-commerce portal
Flipkart.com, set up in 2007 by two ex-Amazon employees and based in the southern
city of Bangalore, that sells a range of goods from books to television sets, analysts
say.

As an Indian company Flipkart is exempt from the restrictions that prevent Amazon
launching a full-service site.

It is targeting at least $100 million in sales for the current financial year and $1 billion
by 2015, up from only $11 million last year as India's e-commerce market grows
exponentially.

Internet penetration is still low in India, which has around 52 million active Internet
users -- those who go online at least one a month, according to the Internet and
Mobile Association of India.

But that figure is expected to grow rapidly, helping e-commerce to take off.

"This is just the beginning of the market with the number of smart phones, debit and
credit cards rising so quickly," Technopak's Nangia said.

Technopak forecasts the e-commerce market, which includes travel and financial
services, will grow to $200 billion by 2020 from $10 billion in 2011.
 "Many Indian young people have no history of only going to retail stores -- of only
consuming in a certain way -- making prospects for e-commerce even bigger."

When Amazon decided to enter the Indian e-commerce market, it was clear from the outset
that something would have to give. That something was the very business model that had
made Amazon an internet powerhouse in the U.S.
Amazon.com debuted as an online bookstore in 1994. Founder Jeff Bezos’s initial business
model was fairly simple: Source a single product type from wholesalers and publishers and
sell it directly to consumers on the then fledgling internet. Thanks to Bezos’s vision and a
highly successful, user-friendly website, by 1997 Amazon.com was the first online retailer to
boast one million customers. As the company added more titles and expanded its product
line, it developed an ecosystem rooted in the wholesale purchase of goods; huge, strategically
located fulfillment centers; and contracts with national and regional carriers who shipped its
products throughout the U.S. and to other countries.
INSIGHT CENTER
 How Digital Business Models Are Changing
No strategy is static.
Challenges, possibly even hurdles, for Amazon, but not insurmountable ones — they just
required an innovative business model, beginning with finding products to sell.
There is no shortage of goods produced by Indians, but most vendors in the country are small.
Three years ago, relatively few retailers there sold their products online because they believed
e-commerce to be too complex and time consuming. And India’s cash economy did not
facilitate online transactions.
To respond to these challenges, after launching its Indian website in 2013, Amazon
developed a program to recruit an army of suppliers and convince them it was a trustworthy
partner that could help them increase the market for their products. Amazon wheeled out a
program called Amazon Chai Cart: mobile tea carts that navigated city streets, serving
refreshments to small-business owners while teaching them the virtues of e-commerce. The
Chai Cart team reportedly traveled more than 9,400 miles across 31 cities and engaged with
more than 10,000 sellers. To help these sellers get online quickly and address their objections
to e-commerce, last year Amazon created Amazon Tatkal, a self-described “studio on
wheels” that provides a suite of launch services, such as registration, imaging, cataloging, and
sales training.
But Amazon also had to adapt delivery and fulfillment. In the U.S., Amazon uses a
centralized shipping platform, which it calls Fulfillment by Amazon (FBA), to store and
distribute the products it sells. Sellers send their goods to Amazon’s fulfillment centers and
pay a fee for the corporation to store, pick, pack, and ship their wares. Amazon implemented
FBA in India as well, and to date has built nearly two dozen warehouses there, the largest one
in Kothur in Telangana.
The company also localized its fulfillment platform in India by introducing Easy Ship and
Seller Flex. With the former, Amazon couriers pick up packaged goods from a seller’s place
of business and deliver them to consumers. With the latter, vendors designate a section of
their own warehouses for products to be sold on Amazon.in, and Amazon coordinates the
delivery logistics. This “neighborhood” approach is convenient for sellers and has benefited
Amazon by speeding up delivery of some products.
Amazon has contracts with a number of major delivery services in the country, including
India Post and cargo airline Blue Dart. Last year it set up a subsidiary, Amazon
Transportation Services Private Limited, to augment delivery. And it utilizes bicycle and
motorbike couriers for last-mile deliveries in both urban and rural communities. But rural
areas, which often are literally off the beaten path, pose special challenges.
India is liberally peppered with small shops — more than 14 million of them, the
overwhelming majority smaller than 600 square feet. These so-called mom-and-pop stores
typically feature high prices and limited inventories, but in many rural communities they are
the only game in town. The government’s FDI restrictions are designed in part to protect
these convenience-store owners. When Amazon.in debuted, many Indians feared the online
behemoth would put them out of business.
Instead, Amazon has enlisted mom-and-pop store owners as partners in its delivery platform.
In small villages and remote areas where few people have internet access, residents can go to
their local store and use the owner’s internet connection to browse and select goods from
Amazon.in. Store owners record their orders, alert customers when their products are
delivered to the store, collect the cash payment, and pass along the money — minus a
handling fee — to Amazon. The arrangement neatly circumvents the problem of conducting
e-commerce in a cash economy. And store owners report increased sales of their own while
customers are on-site.
From product to delivery, Amazon has reinvented its ecosystem to address the challenges it
has faced conducting an e-commerce enterprise in India. This past June, Amazon committed
another $3 billion to its India operations, demonstrating continued faith in the “huge potential
of the Indian market.” Its funding and efforts are outpacing those of its competitors, including
Flipkart and Snapdeal. That’s because there is a lot at stake. A recent Google/A.T.
Kearney study predicts online retailing in India will expand to 175 million shoppers — three
times the current number — by 2020. E-commerce is widely expected to exceed $100 billion
by that same year. Morgan Stanley Research estimates the number could rise to $137 billion.
And given that mobile wallets already outnumber credit cards and are increasing in
popularity, the stakes could be even higher.

 INITIAL PROBLEMS THAT THEY FACED?

A group of more than 2,000 online sellers has filed an antitrust case against Amazon in India,
alleging the U.S. company favours some retailers whose online discounts drive independent
vendors out of business, a legal filing seen by Reuters showed.

The case presents a new regulatory challenge for Amazon in India, where it has committed
$6.5 billion in investment but is battling a complex regulatory environment.

In January, the Competition Commission of India (CCI) had ordered an investigation of

Amazon and rival Flipkart, owned by Walmart , over alleged violations of competition law
and certain discounting practices, which Amazon is challenging, according to court filings.
In the latest case, the All India Online Vendors Association, members of which sell goods on
Amazon and Flipkart, allege Amazon engages in unfair business practices

Earlier this summer, Amazon announced that it would be investing $2 billion to expand its

operations in India—that announcement unsurprisingly came hours after FlipKart, widely
considered to be the “Indian Amazon,” announced it would be investing $1 billion towards
growth. But, even with $2 billion in hand, growing in India may prove more difficult than
expected for the retail giant for one simple reason: Amazon does everything in its power to
avoid paying taxes, and the Indian government is not happy about that.
According to the International Business Times, Amazon is using its favorite argument in
favor of tax avoidance: “it only acts as an intermediary between sellers and buyers.”
Authorities in Bangalore, where Amazon is headquartered, understandably disagree; they
think that Amazon is using loopholes to make a “backdoor entry” into Indian retail.
The IBT has more on the dispute:
According to India’s FDI [“foreign direct investment“] norms, overseas companies can only
be involved in the multi-brand retail business through an Indian subsidiary or in a minority
partnership with a local company. Amazon, which has reportedly opened three huge
warehouses in Bangalore over the past year, operates what’s known as the “marketplace
model,” which allows other companies to use Amazon’s website to sell their products across
the country. …
While local dealers are liable to pay more than $16.5 million in Value Added Tax, or VAT, to
the government, Amazon is only paying service tax on the commissions it earns for
delivering the products, the officials reportedly allege, and have demanded that the company
register itself as a dealer and pay VAT.

This is a familiar position for Amazon. The company has been criticized by European
authorities for years for channeling its business through Luxembourg, where it’s
headquartered; the company is currently under investigation by the European Union for its
use of tax havens. Amazon currently only collects sales tax in 21 states in America.
Amazon is fighting back in India. In a statement released earlier this week, the company
claimed that Indian laws “have not kept pace with the new-age online business models that
enable a faster, convenient and nationwide access to customers for sellers, especially small
and medium businesses, at significantly low costs.” At Amazon, even tax disputes are an
excuse to brand yourself as a model of customer service.

It’s tough to look at a growing, profitable company that generated $72 billion in revenue just
over the holiday season and find problems with its business. Especially when that company’s
name is Amazon.
But when you look at Amazon’s core online shopping business, there is some reason for
concern — and new regulatory changes in its most critical international market of India is a
big reason why.
First, it’s hard to overstate how important the Indian market is to the future of Amazon’s
long-term ambition in its main business of online retail.
That’s because at some point, Amazon’s business in North America will have little new room
for growth. The growth in the number of products Amazon sold decelerated once again
during the holiday quarter, to just 14 percent year over year, down from 23 percent last year.
So Amazon has announced more than $5 billion in investments in India — and that’s just
what the company made public between 2014 and 2016 — in an effort to make sure it doesn’t
stumble in the international market with the most long-term growth potential since
China, where it has failed to make any real impact on the market.
Since Amazon entered India in 2013, it has had to operate differently than everywhere else in
the world due to rules there dictating how foreign-owned online businesses can operate;
namely, Amazon has only been able to offer products for sale on its platform from other
merchants, rather than also acting as a retailer itself.
Worldwide, 48 percent of the physical products Amazon sells are ones it sells itself. In India,
that number has been zero.
Top ArticlesREAD MORENice raise. Too badabout inflation.

But Amazon has circumvented those rules by selling goods through big online merchants in
which it has an ownership stake. The problem is that new regulations implemented this week
ban that practice, too.
The new Indian regulations also restrict Indian e-commerce platforms from offering deals
from brands that are exclusive to just one site. Amazon also may not be able to offer heavy
discounts on products in the way it has in the past.
Arvind Singhal, a consultant with Technopak Advisors Pvt, told Bloomberg on Thursday he
estimates that Amazon’s “revenue growth could fall to 15 percent in coming months from 25
to 30 percent previously.” Amazon’s main rival in the country, the Walmart-owned Flipkart,
will also be impacted.
On Amazon’s earnings calls with both reporters and analysts on Thursday, Amazon’s chief
financial officer Brian Olsavsky sounded concerned.
“There is much uncertainty as to what the impact of the government rule change is going to
have on the e-commerce sector there,” he told analysts, according to a transcript of the call.
And on a call with reporters, Amazon said it would abide by rules, but stressed that the rules
are not conducive to how the company best likes to operate: by offering the biggest selection
of products at the best prices. Again, Amazon does not make points like this unless it is
concerned.
The moves in India would not be so critical if Amazon’s main e-commerce business were
growing rapidly in other parts of the world — but it’s not. Amazon’s international business is
growing just 15 percent year over year, and that number could very well decrease as a result
of these changes.

 HOW THEY TACKLED IT

1. Amazon is Complex
Sellers are challenged with learning in detail about shipping options, FBA logistics, re-
negotiating fees, duplicate listings, MAP issues, tax set up, buy box competition, reviews
management, and more. We’ve seen our clients go from having one part-time employee
managing their Amazon programs, to dedicating experienced teams and bringing in agencies
once they start to see the sales potential in the channel. Success on Amazon requires keeping
up with the evolving landscape and leveraging experts, whether in house or through an
agency like Adlucent, to run a healthy and profitable program.
Solution: The biggest mistake we see is brands approaching Amazon as an afterthought and
not capitalizing on its true potential, usually because they simply don’t know where to start.
You can start by comparing your performance potential on Amazon to your other channels,
and re-allocate your resources accordingly. Take advantage of resources that Amazon offers,
including Amazon’s Boost with FBA event, and their Seller Education channel on YouTube.
If you’re still how to do this, contact us and we can help you analyze and forecast the
opportunity for your products.
2. Profitability Isn’t Guaranteed.
Depending on your sales structure, margins, shipping costs, and competition in your category,
your profit on Amazon can vary greatly. Analyzing marketplace performance and
profitability accurately and in a timely fashion is challenging.  Adding to this, Amazon’s
reporting leaves a lot to be desired, so may sellers don’t really know if they are truly
profitable or not. If you’re running a hybrid program between 1P and 3P and also running
advertising campaigns, you have to download reports from several different interfaces, then
figure out a way to merge the data in a useful way and factor in your fee and margin data to
really understand profitability.
Solution: We recommend using an agency or a third party reporting tool to pull in your data
and help you analyze it in a useful way. Here at Adlucent, we developed a  proprietary
Amazon reporting tool to pull in product margins at the SKU level, show sales performance
across both 1P and 3P and from advertising campaigns to provide a true profitability analysis
for you on an ongoing basis. A solution like this can help you examine your margins across
channels with all components factored in, allowing you to make better business decisions.
This can also be helpful in understanding sales forecasting and pricing recommendations for
your products based on category research.

3. There’s A Lot of Competition

Certain industries on Amazon — nutrition supplements and electronics, for example — are
very saturated, making it difficult to enter the marketplace and secure market share.
Increasing competition from new sellers in their categories is a challenge we often hear from
brands.  So, whether you are re-selling and competing for the buy box or you manufacture
your own products, it’s crucial to perform competitive analysis and constantly evolve your
strategy. We also often hear from brands that competitors are bidding on their brand terms,
showing headline search ads to cannibalize their traffic, like this example for Bose
Headphones:

Solution: While there are many nuances in competing on Amazon based on the type of
products you are manufacturing or selling and your industry, our top three recommendations
to secure market share are:
 Focus on building reviews. The quality of your product reviews not only factors
into your organic ranking in Amazon search results, but it can increase your
conversion rate significantly. Our general rule of thumb is to have at least 100
reviews per product, with a 4.0 rating or more. We recommend using a service
like Feedback Genius to engage your customers for feedback.
 Evaluate your product mix. Do you manufacture your own products? If you’re
a retailer, do you have a private label brand? How do your prices on Amazon
compare to your D2C site? Do you offer exclusive items only available on
Amazon? What is your strategy with resellers — do they have access to your
entire catalog, and are you enforcing MAP? If you have a registered trademark,
are you using Amazon Brand Registry? The last thing you want to do is start
racing to the bottom and competing only on price, especially against your own
resellers.
 Build a paid advertising strategy.  By placing sponsored product ads for your
products and having a strategic keyword and bidding process, you can capture
 relevant queries and drive traffic to your detail pages, as well as secure valuable
real estate toward the top of the search results on Amazon. We also recommend
running headline search ads on your own brand terms to defend your brand from
competitors who are likely already targeting your terms.

 HOW THEY ATTRACTED CUSTOMERS

“Customer is King” is an age-old business mantra. You have to give them the Best. Don’t
you like to be treated like a King/Queen when you go to a Salon or say a Restaurant! They do
too! Why do you think the 5 Star Hotels like Hilton, JW Marriott, Taj, Grand Hyatt, etc.
charge such ridiculous amounts of money? Not just because of the consumption power of
people but also because these hotels provide “LUXURY”. The ambience, the rooms, food,
facilities are all top notch. Why won’t people with the spending power want to enjoy it!

consumer is king

Similarly, when people come online to shop, your website should give them a feel that they
are in the right place. As Marketers, you have to be easily accessible to them.  When people
search for your products and services, you would want to appear as high in the rankings as
possible right.
What do searchers do when they search? Do they just search once and then decide on what
they were looking? No right? They edit their search terms look again and again until they
have finally made their research and analysis. So, the more you show in these search results
the better recall value the customers have of your product.
Just like you there will be other Marketers who would want to attract customers towards their
products. Internet didn’t just make it easy for people to communicate with each other, it also
has opened a myriad of options

confused

How will you make sure the customer comes to you? It just takes a click of a button to make
or break a deal.
Amazon: The New Search Engine
Having said how important the customer is, how and where do we place ourselves for them to
find us?  Usually when someone says “SEO,” we immediately think of Google. So, who do
you think would be a competitor to Google…Yahoo right? But I was surprised to know that it
is Amazon not Yahoo that isGoogle’s main search Engine competitor.
We don’t think about Amazon as a Search Engine.  Home to over 480 million products,
Amazon is an online retail monster. However, what makes Amazon even juicier than Google
is that, unlike Google, the majority of people who go to Amazon are buyers. They aren’t
there to do research or look up some fact. They have a product in mind and are ready to
purchase.
Google built a search engine so they could sell ads. Amazon built a search engine so they can
sell products. That creates a basic difference in how each measures success. While eyeballs
on Google often equate to browsers and researchers come, Amazon attracts buyers.

In today’s time when people are looking to buy something they very often skip Google search
and go straight to Amazon.
Marketplace

traditional marketplace

If you are in the business of selling consumer goods, or you want to, you should be on
Amazon. More than 320 million users worldwide shop at Amazon.
It is the online shopping network where other retailers can sell their products. Amazon
Marketplace is like a Shopping Centre. It charges a fee for their service from the sellers. It
takes a percentage of each sale completed between another seller and the buyer.
 Prime
Amazon also has a subscription based business model through its Amazon Prime service as
well as a small electronics product line.

Amazon Prime

Under the Prime account customers pay an annual fee to get free two day or same day
shipping on items eligible as prime items and have access to digital music, photo storage,
streaming movies, TV. Prime Video offers exclusives from some of the World’s best story
tellers.
 Kindle 
Amazon also generates money from Kindle, its e-reader. However, they make no money out
of the Kindle itself, it’s more of a content driver.  Each Kindle Fire comes with one-month
free Prime subscription. Once the users get a taste of the vast content and benefits of Prime,
they are more than willing to pay the annual fee to subscribe to Prime.
 amazon Kindle money
 AWS – Amazon Web Services
From the time of its inception, AWS has expanded into world’s most comprehensive, widely
adopted cloud service. It is being used my more than a million customers from organizations
of every size e.g. Airbnb, McDonalds, Pinterest, Johnson & Johnson, Philips, Adobe, GE etc.
AWS provides good scales and broad set of services and features. As time passes by most
companies will choose not to run their own data centres, instead they would opt for cloud.
 Competitive Strategy
All of Amazons Competitive Strategy revolve around the central idea that the customers
experience is of utmost importance. Amazon realizes that what the customers want more than
anything is the quick delivery of the products they order.
 Amazon uses Cost Leadership as its generic strategy for competitive advantage. This
strategy pushes Amazon to minimize its price levels. The low prices are significant in
attracting customers.
Differentiation conveys two ideas:
1. Providing superior benefits
2. And providing different benefits versus competition.