This is the latest in Localogy’s Skate To Where the Puck is Going series. Running semi-weekly, it examines the moves and motivations of tech giants as leading indicators for where markets are moving. Check out the entire series here, and its origin here.
Jeff Bezos is currently in India, and lots of things are happening. Despite protest for alleged predatory practices in the online marketplaces that Amazon operates there, Bezos remains committed to the greenfield opportunity in the 1.44-billion person country. This is especially ripe with SMBs.
Almost half a billion people in India came online in the last decade. However, most SMBs in the country remain offline. PwC India meanwhile projects the country’s e-commerce market to grow to $150 billion in the next three years. It currently represents about 3 percent of India’s consumer spending.
To that end, Bezos announced at a conference in New Delhi this week that Amazon will invest $1 billion to help SMBs in the country come online, bringing the all-time total to $6.5 billion. Of course, this is packaged as altruistic but it’s more about seeding online marketplaces in the region… and that’s okay.
It’s also about exports, which does indeed have economic development potential for India. The explicit line from Bezos is that Amazon would like to make India-produced goods represent $10 billion in merchandise on Amazon’s platform by 2025. This aligns with New Delhi’s “Make in India” program.
Amazon already has about 500,000 sellers from India, the goods of which are distributed on 12 of its marketplaces globally. According to a statement from Bezos:
“Over the next five years, Amazon will invest an incremental $1 billion to digitize micro and small businesses in cities, towns, and villages across India, helping them reach more customers than ever before […] This initiative will use Amazon’s global footprint to create $10 billion in India exports by 2025. Our hope is that this investment will bring millions more people into the future prosperity of India and at the same time expose the world to the ‘Make in India’ products that represent India’s rich, diverse culture.”
Online to Offline
Separate from the $1 billion investment, Amazon has finalized the purchase of a 49 percent stake in the India-based Future Coupon Limited (FCL). It has been trying to do so for more than two years, during which time it was under approval and processing of the Competition Commission of India (CCI).
Now residing under Amazon India, FRL stores and consumer brands will be distributed on the Amazon India marketplace. Beyond boosting the catalog of goods, per the above drivers, this deal notably has the additional dimension of marrying online (Amazon) and offline (FRL stores) capability.
As is signature Amazon, these offline locations will plug into its logistical systems in the region. For example, FCL will be a sort of fulfillment network, where products ordered on Amazon can be delivered from 1500 FCL stores and warehouses that serve 400 cities and 16 million square feet of retail space.
“FRL’s national footprint of stores offering thousands of products across fashion, appliances, home, kitchen and grocery will now be available to millions of customers shopping on Amazon, in hours across 25+ cities,” said Amit Agarwal, SVP & Country Head of Amazon India in a statement.
This will start with grocery, general merchandise, fashion and footwear, and grow from there. Beyond product categories, synergies and functional dynamics will likely grow as well. It wouldn’t be Amazon otherwise. For example, loyalty programs and retention can stem from online payments.
“We have a database of 8 billion transactions and 55 million customers,” said FCL Chairman, Kishore Biyani, “Payments is one platform where we can acquire the customer base. And if the customer starts using your payment mechanism then the loyalty factor increases. So it’s getting into the ecosystem.”
