The world’s best-known electronic commerce major is using physical channels to increase its reach in India.
The Indian arm of US-based Amazon Inc, which is believed to be the second-largest ecommerce marketplace in India, has been steadily building up its offline reach to cater to hitherto untapped hinterlands of India.
The recent past has seen the ecommerce major tie-up with offline distribution channels that allow potential customers to walk inside a store, browse the shopping website and place orders — at times even assisted by trained personnel in the store.
It all happened around mid-2015 when Amazon India kicked off its assisted shopping project — code named internally as Project Udaan — to test the waters. It was launched across a few stores in Erode, Tamil Nadu.
The company selected its offline partners from across categories like fancy stores, medical stores and mobile shopping outlets among others. Customers are provided access to Amazon India’s website on a desktop in such stores.
Beyond expectation“The initial response was beyond our expectation since the stores not only started getting high footfalls from interested customers but also from people who wanted to sign up and open more stores. The program has scaled up dramatically in the last one year,” said an Amazon India spokesperson in response to an email query by The Hindu .
“We believe that the initiative has the potential to be a game-changer for Amazon in India and transformational for all neighbourhoods and communities,” added the spokesperson.
One year into the project, it has expanded across 13 states and 75 locations — across tier II & III cities — with partners like Vakrangee, Smart Buy, Rajasthan government’s eMitra program, ConnectIndia and StoreKing.
Incidentally, a recent report by Kotak Institutional Equities states that Amazon India leads Indian ecommerce portals in terms of user visits on desktop and mobile website.
Desktop+Mobile“While we don’t have a long history of data available with us, Amazon’s desktop+mobile websites generated (around) 33-62 per cent more visits per month compared to Flipkart, over seven months starting November 2015. We note that this data excludes traffic from apps,” according to the report, citing data from analytics firm SimilarWeb.
The concept of assisted shopping and offline channels is not going unnoticed. Grant Thornton, in a recent note, said that assisted ecommerce is the next revolution as it overcomes the challenges faced by the ecommerce companies in expanding the reach to rural India, including poor connectivity and lack of trust in online shopping.
Grant Thornton, among ‘Big Four’ group of consultancy firms, highlighted the fact that a Vakrangee franchisee from Kota in Rajasthan booked orders worth Rs.20 lakh in two days.
Vakrangee, a BSE-listed company, is just one of the many offline partners of Amazon. In July 2015, it entered into a five-year exclusive tie-up with Amazon wherein the ecommerce entity could use ‘Vakrangee kendras’ as physical ordering and collection points for Amazon’s products and would pay 4-15 per cent of the gross merchandise value (GMV) as commission to Vakrangee.
Dinesh Nandwana, managing director & chief executive officer, Vakrangee says that while his company has 20,677 Vakrangee Kendras across 15 states — mostly in under-served areas — the target is to have 75,000 such kendras by 2020.
Target 10,000“Currently Amazon services are available in 465 such kendras and the target is to offer it in 10,000 centres by 30th June. We are also targeting 10,000 orders per day. We plan to tie up with IOC (Indian Oil Corporation) to have our Kendra at the petrol pumps. Amazon will be the indirect beneficiary of this tie-up as well,” says Mr Nandwana.
Global financial major Bank of America Merrill Lynch says that the tie-up allows Amazon to become stronger in rural areas and improve its last-mile connectivity.
“In our view, with this kind of arrangement Amazon is able to expand its addressable market to consumers who do not own a mobile/smartphone and helps Amazon target mid-to-low-end income consumers,” it said in a note released in May.
