Can Jeff Bezos of Amazon who is Betting Big on India Succeed in His Endeavour?
Why is Jeff Bezos Persisting in India despite Making Losses for so many Years?
Jeff Bezos, who is the founder and majority owner of the online retailer and eCommerce giant, Amazon, is the Talk of the Town in India.
With his three day visit to the country being prominent in the news cycles and being feted by everyone from fellow entrepreneurs and businesspersons to Bollywood stars, Bezos with his Multi Billion Dollar Investments in the country is indeed flying high.
However, the moot question is whether Amazon, that has not turned in a profit for the last so many years, can succeed in a country where almost 90% of the people do not buy online and instead, prefer Kirana and other Mom and Pop stores.
Of course, the reasoning behind Bezos pumping in so much money into India and even withstanding losses and in-spite of them is create a captive market for Amazon, which once “hooked” would be loyal to the firm.
Indeed, this is pretty much the strategy of most Multinationals, especially in the FMCG (Fast Moving Consumer Goods) and other consumer products categories wherein with their Deep Pockets, they absorb much losses and then go for the kill once the consumers get used to buying their products, or in the case of Amazon, shopping online.
Are the Indian Regulators too Harsh on Amazon and whether they are Justified?
Having said that, Amazon faces tight regulatory scrutiny and a great deal of resistance from the small traders and retailers who fear that its legendary capacity to Stay in the Hunt till the time it begins making profits and then, accelerate, would drive them out of business.
After all, Amazon with its huge discounts and rock bottom prices, especially in the Smartphone categories, has made buying such products online the default option for Indians. Moreover, even Walmart owned Flipkart, too is matching such discounts, leading to a Race to the Bottom in the Indian Retail Market.
However, these Predatory Pricing strategies have attracted attention from the CCI or the Competition Commission of India that regulates the retail market.
The charges by the regulator are in terms of how such pricing and concomitantly, stocking of products that are from firms owned (or partly owned) by these eCommerce giant, lead to more profits for these subsidiaries, at the expense of other sellers and distributors, who are registered on Amazon and Flipkart.
Indeed, the changing regulatory environment in the country is especially worrying for Amazon and Bezos as it is perceived to be friendly towards native firms and more so, towards Mukesh Ambanis Reliance, that is planning a foray into the retail segment.
Will Reliances Entry be a Game Changer and How Bezos is responding?
Talking about Reliance and Mukesh Ambani, the proposed foray by Reliance Retail, would be a game changer as far as the Indian Retail Market is concerned.
As Ambani envisages the bringing together of Millions of Bricks and Mortar stores and Kirana stores onto his online platform, Jio, and this integration would lead to a gigantic online and physical retailer network that Amazon would find it very hard to beat.
Indeed, if and when Reliance launches this platform, it would mean that consumers can order their goods from any of the neighbourhood as well as other trader and retailers and such goods would then be delivered to the doorstep by the firms logistics team.
To counter this, Bezos, announced a Mega Plan to include as many SMEs or Small and Medium Enterprises as possible into the Amazon platform, to ensure that he too has depth and scale to compete with Reliance.
Moreover, Bezos is already tapping into the prevailing Nationalistic sentiments in the country with his plan of leveraging the Make in India initiative to export goods to other countries, made by Amazons partners.
Bezos needs India and He Must Implement a Glocal Strategy
Therefore, with all these moves and countermoves by each of the players, the question arises as to whether Amazon and Bezos can keep the momentum going.
Bezos needs India more than the country needs him because Amazon is not allowed to enter China, the only other market where Hundreds of Millions of the Consuming Classes present an opportunity.
This leaves him with India to scale up given the gigantic market and the efficiencies from the economies of scale and the synergies from integration of online and offline partners can make Bezos that much richer than he is already is.
In addition, Amazon also has the Early Mover Advantage in India, though Flipkart predated it and hence, it is the First Mover that has made many Indians flock to it with its global brand image and brand equity drawing Indian consumers in droves to its platform.
Nonetheless, the familiarity and intimacy of physical shopping is deeply entrenched in the Indian Consumer Psyche and this is where Bezos has to implement a Glocal Strategy wherein he leverages the Global image and International Strategy and tailors it to Local cultural and physical conditions.
Last, the Modi Sarkar has to decide whether it is for opening up of the Indian Retail Market to foreign players fully or whether it wants to please its traditional vote bank of traders and small businesspersons. It cannot have it both ways, though a middle path is possible.
This is the determining factor as far as Amazon and Bezos are concerned, and doubtless, this is something that he is aware of as his statements and appearances, whenever he visits India, convey.
To conclude, the Indian Retail Market is in the Throes of Churn and Change and hence, we can expect more turbulence till the Dust Settles eventually.
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