AMAZON IN EMERGING

MARKETS
Case W94C01
August 1, 2014
Revised November 7, 2019
 • Muhammad Inaam –
Presented 007
By • Mohsin Javed - 009

• Dr. Adeel Nasir

Presented • Business Policy Class –
To 2018- EMBA
 QUESTIONS THAT SHOULD BE ANSWERED
BY THIS PRESENTATION
• What are the risks and rewards for an early and late mover in a new Market?
• What are the measurements of success in emerging markets?
• How intense was the Competition of Amazon in China, India, Latin America with their home
grown firms?
• Should Amazon enter in emerging markets?
AMAZON’S CHIEF COMPETITORS
China
(Alibaba
Group)

Amazon

India
Brazil
(Flipkart
(Mercado
and snap
libre)
deal)
 AMAZON’S BACKGROUND

Inc. 1994 Evolution 1997

• Online vendor of books

• Global Customer
Centric phenomenon
• Servicing consumers,
sellers and developers
with ops in 22 countries
 INTERNATIONAL EXPANSION

United bookseller.co.uk
Kingdom

Amazon’s
Intl.
Expansion
(1998-)
Germany
Telebuch.de
 HIRING DIEGO PIACENTINI

• In 2000, Amazon hired Diego Piacentini

• Former Apple’s General Manager for Europe
• Since his hiring Amazon launched nine other
country specific websites
https://www.amazon.es/ https://www.amazon.co.jp/ https://www.amazon.it/

https://www.amazon.cn/ https://www.amazon.ca/ https://www.amazon.fr/

https://www.amazon.br/ https://www.amazon.au/ https://www.amazon.mx/

AMAZON COUNTRY SPECIFIC WEB PAGES
AMAZON CONSOLIDATED FINANCIAL RESULTS
($MILLIONS, EXCEPT PER SHARE DATA)
AMAZON GEOGRAPHIC BREAKOUT OF
FINANCIAL RESULTS ($MILLIONS)
AMAZON PARTIAL BREAKOUT OF INTL.
REVENUES ($MILLIONS)
 THE INDIAN ECOMMERCE MARKET

• Official entrance with

the launch of
Amazon.in. on June 5,
2013.
 THE INDIAN ECOMMERCE MARKET
Internet Users (per 100 people) Mobile Cellular Subscriptions (per 100 people)
 INDIAN E-COMMERCE INDUSTRY

The Associated Chamber of Commerce and Industry of India

$2.5 Billion $8.5 Billion $16 Billion

in 2009 in 2012 in 2013
 POTENTIAL OF INDIAN E-COMMERCE
INDUSTRY

• Analysts from the “Indian retail consultancy Technopak” believed

that India’s e-commerce industry could grow 61 times over the next
decade
 THE INDIAN ECOMMERCE MARKET
• Hurdles faced by Amazon
• The 51% Foreign Direct
Investment (FDI) limit
• Unlike USA, perform as Pure
Marketplace only
• Mom & Pop Stores domination
• Lack of Transportation
Infrastructure
• Major Power Failures
• Highly Impoverished Population
• Cash Payments
 COMPETITION IN INDIA

• Flipkart
• Founded in 2007 by two ex Amazon employees,
Sachin Bansal and Binny Bansal
• By 2013, Flipkart held about 4.9% of the Indian e-
commerce market (Amazon held 1.6% and eBay
1.2%)
• Key success factors included the cash on delivery
mode of transaction and an owned logistics network.
 COMPETITION IN INDIA

• Flipkart modus-operandi

Indian Online Retail Space

Expansion of
VC
product
Investments
offerings
 COMPETITION IN INDIA

Flipkart
Acquisitions

Mime360 Chakpak.com Letsbuy.com

WeRead (2010)
(2011) (2011) (2012)
 COMPETITION IN INDIA

• Flipkart valuation by the end of 2013

• $1.6 billion in sales
• 100,000 products
• 13.22 million unique visitors
COMPETITION IN INDIA

Flipkart homepage
 COMPETITION IN INDIA

• Snapdeal
• Originally founded as an e-coupon website in
2010
• Founders, Kunal Bahl and Rohit Bansal
• Revamped on the same footing as of the
Chinese e-tailing giant Alibaba
• Recreation of Snapdeal.com as an e-commerce
marketplace in 2011
 COMPETITION IN INDIA

• Snapdeal valuation by the end of 2014

• $1 billion in June 2014

Partners
• eBay (invested $50 million in 2013)
• Intel Capital
• Saama Capital
• Nexus Venture Partners
• Bessemer Venture Partners
• Kalaari Capital
COMPETITION IN INDIA

Snapdeal homepage
Snapdeal Acquisitions
Esportbuy.com

Shopo.in

Doozton.com
 COMPETITION IN INDIA

• eBay
• Entered the Indian market after the acquisition of
Baazee.com
• Focused initially on selling gift items such as
chocolates and flowers
• By 2014, it listed over 2,000 specific product
categories from 45,000 traders
• In 2012, eBay launched its own logistics option the
PowerShip program for the purpose of coordinating
shipping for member traders
 COMPETITION IN INDIA

• In April 2014, eBay partnered with Confederation of

All Indian Traders (CAIT)
• Became the recommended platform for small Indian
sellers
• By partnering with eBay member traders could sell
their merchandise through any of eBay’s 39 global
sites to over 145 million active eBay users
worldwide
 AMAZON’S INDIA APPROACH

• 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
listing over 10 million products)
• The site assisted customers with comparison of reviews,
pricing and shipping details
• The idea was to invest big from the start
• Strategizing to compete with already developed competitors
 AMAZON’S INDIA APPROACH
• Initial investments went to Amazon’s core strength in logistics
• Prior to launch it had already completed the construction of a 150,000 square feet fulfillment
center outside Mumbai and built one later in Bangalore
• Offered “Fulfillment by Amazon” program which enabled sellers to stock their products at
Amazon distribution centers and have Amazon handle the delivery for a fee
• First e-tailor to offer next day shipping
• Attracted domestic sellers by appeasement through member ship programs
• Referral & Associate Programs
• COD
MARKET-SHARE AMONG MOBILE USERS

Avendus Capital
- 67 million users in 2013
Pie Chart as of 2014
- Projected 382 million by
2016

Snapdeal
eBay 31%30%
others
 THE WORLDS LARGEST MARKET CHINA

Consumer 2002 27 million online consumers

Estimate

2004 80 million online consumers

2014 Projected to reach 650 million

 THE WORLDS LARGEST MARKET CHINA

Valuation 2002 $1.3 billion

2005-2006 $16 billion
Compounded
Annual Growth
2014 Valued at $300 billion
Rate of nearly
70%
2015 $540 billion expected
 CHINESE USERS
Internet Users (per 100 people) Mobile Cellular Subscriptions (per 100 people)
 THE WORLDS LARGEST MARKET CHINA

“In other countries, e-commerce is a way to shop, in

China it is a lifestyle”
Jack Ma
 THE WORLDS LARGEST MARKET CHINA

• Chinese customers were known to use social media

extensively
• 300 million users of social media spent more than 40% of
their time on Internet browsing social media sites
(According to McKinsey & Co.)
• Popular social media sites included WeChat and Weibo
• Purchases via mobile device climbed from $7.8 billion in
2012 to $41.4 billion in 2015)
 COMPETITION IN CHINA

• EachNet
• Founded in Shanghai in 1999
• Founder Bo Shao and Haiyin Tan
• 3.5 million registered users in 2002
• Leader online trading site in the Chinese e-commerce market
• 33% stake of the company acquired by eBay for $30 million
in 2003
• eBay invested an additional $100 million in to the entity eBay
EachNet
 COMPETITION IN CHINA

• Alibaba
• Founded in 1999 by Jack Ma
• Launched in Hangzhou as an online forum for
Chinese manufacturers
• In 2002, made its first profit, $1 only
• Launched Taobao.com in 2003 as a way of
preventing eBay from taking away its customer
base
 COMPETITION IN CHINA

• Market Strategizing by Alibaba

• Utilized TV channels with Taobao ads as compared to the
eBay’s purchase of exclusive rights to internet ads
• At the time more Chinese were front of their TV sets than on
the internet
• More importantly Taobao didn’t charge its sellers any
commission fees
• Signing up was easy, five mins to register on the site
• In 2013, Taobao recorded 7 million sellers and over 800 million
product offerings.
 COMPETITION IN CHINA

• Tmall (Alibaba)
• Business to consumer marketplace designed for bigger
merchants and major labels such as Nike and Gap
• Each business selling on Tmall was required to pay deposit
to setup its business and charged fee on each transaction
accordingly
• Created in 2008 as a part of Taobao.com, Tmall.com
officially became its own website in June 2011
• By the end of 2012, Tmall had attained a 51.5% share of
the Chinese business-to-consumer marketplace
TAOBAO.COM AND TMALL.COM (ALIBABA
GROUP)
 COMPETITION IN CHINA

• In 2013, combined transaction volume for the two sites (Taobao and Tmall) equated to $240
billion, more than the transactions for Amazon and eBay combined ($100 and $75 billion
respectively)
COMPARATIVE METRICS
 COMPETITION IN CHINA

• Joyo.com
• Founded in 2000, the largest online
retailer of books, music and videos in
China
• As of 2004, Joyo also sold software, toys
and gifts, among other products
 COMPETITION IN CHINA

• Jingdong Mall / JD.com

• JD.com in China was the other major competition,
formerly know as 360buy.com
• Founded in 1998, its market place went online in 2004
• In 2012, it had a market share of 22.7% making it China’s
third largest internet retailer
• Total merchandise sales reached $16.39 billion in 2013.
• In March, TenCent Holdings acquired 15% stake in
JD.com for $215 million
AMAZON’S CHINESE EXPERIENCE

Acquired
Joyo.com for $75 Chinese Market
million in 2004

GDP Growth Rate: 10% each year

Internet User Base Growth: 7.3% of the 1.3
billion person population
 AMAZON’S CHINESE EXPERIENCE

• Its first year in China, Amazon operated under Joyo.com’s

domain name mainly offering books, DVDs and CDs
• By 2007 it had increased its product offerings thirty-two fold
offering electronics, baby products, beauty care products and
watches.
• In 2007, Amazon changed the domain name from joyo.com to
amazon.cn
• In June 2013, it launched its Kindle e-reader in China
 AMAZON’S CHINESE EXPERIENCE

• Amazon Chinese Customer Experience

• Amazon China delivered 5,000 copies of the new
Harry Potter book in Chinese, however, when a
competitor undercut Amazon’s price by 5 RMB (less
than $1), Amazon issued a refund for the difference to
the customer who were not expecting that.
 AMAZON’S CHINESE EXPERIENCE

• Initially Amazon used Joyo’s three fulfillment centers located in Beijing, Shanghai and
Guangzhou
• Expanded Amazon’s distribution network by creating fifteen fulfillment centers across China
being its largest logistics operation outside the U.S.
• Different to its US model, Amazon played a large role in the last leg of the delivery process
• Instead of vans or trucks intra-city deliveries were commonly carried out on bicycles or scooters
due to heavy traffic
 AMAZON’S CHINESE EXPERIENCE

• Reluctant to pay in advance via credit card, the Amazon.cn adopted Joyo.com’s cash on delivery
option
• It offered free shipping on all purchases through its site
• It also offered product recommendations to customers based on their past purchase history
• Despite its early investments, Amazon’s share of the Chinese business-to-consumer e-commerce
stood at a mere 3.5% by the end of 2012
• However, as noticed by Piacentini, Amazon had at least made its way into the top five e-
commerce websites by Jan 2014
 AMAZON EMERGING MARKET: BRAZIL

• Launched Amazon Brazil in December 2012

• Brazil ranked 7th in the world by GDP soon became an emerging market

Internet 2013 51.6% or 103.4 million

Usage

2015 85% projected access

according to Mckinsey & Company
AMAZON EMERGING MARKET: BRAZIL

Ease of doing business 2013

 COMPETITION IN LATIN AMERICA

• MercadoLibre
• Launched in 1999
• Founder, Marcos Galperin
• MercadoLibre came from a Portuguese
word MercadoLivre meaning free market
MERCADOLIBRE BRAZIL WEBSITE
COMPETITION IN LATIN AMERICA

MercadoLibre consolidated financial results

COMPETITION IN LATIN AMERICA

MercadoLibre % of Total Consolidated Revenues by Geographic Market

 COMPETITION IN LATIN AMERICA

• MercadoLibre also offered MercadoPago

• MercadoPago was an escrow based payment service
• One of firm’s most important revenue streams
• Other businesses included MercadoEnvios, a
shipping solution for sellers, Advertising Services,
Classified and Online Stores Service
AMAZON VS MERCADOLIBRE (MELI) STOCK
PERFORMANCE
AMAZON APPROACH IN BRAZIL

4-Smiles of Amazon Brazil

Market Attractiveness
BRAZIL’S GROWING POPULATION AND
DEMAND
 OTHER MARKETS

• Kindle store launched in Mexico in August 2013

• Established its first office in Russia
• Through Taufeer.com Amazon sold products to
millions of people across middle east
 PRODUCTS AND SERVICES

• Introduced
• Kindle Fire HDX
• Amazon Fire Phone in 2014
• Expansion of Amazon Web Services
(AWS)
 CONCLUSION

• Amazon was incorporated and had evolved from a small vendor of online books to other products in 1994.
• The entrance strategy of Amazon was not an aggressive one in China rather it chose to slow growth.
• The practice of competitive strategy by Amazon was by the release of next-day delivery which was
followed through other organizations in India.
• Amazon entered in Latin America in 2012 with the launch of Kindle application by 2014.
• All three countries are highly populated with rapid penetration of internet users in 2013 per hundred
population included 51.6 in Brazil (Latin America), 45.8 in China and 15.1 in India. Therefore, it should
expand its business in the emerging markets throughout the world.
THANKS ANY QUESTIONS