Amazon has faced hate and love in India. The company has had to fight domestic industry lobbies, who claimed the e-tailer was robbing them of their profits; while it benefited from the digitisation of the country’s economy, which accelerated post-pandemic lockdown. Overall, in this hate-love tussle, things have worked hugely in the e-commerce giant’s favour. Today, as the company’s strategy of bringing more customers and businesses online is in perfect sync with the country’s ambitions of digital inclusion and empowerment, senior vice president and country head of Amazon India, Amit Agarwal talks to editor N Mahalakshmi. At Outlook Business’ Leading Edge 2021, he tells us why they believe they are lucky and that their luck will hold, and about the workings of Jeff Bezos’ mind. Edited excerpts:
How is the weather in California, in terms of business?
Agarwal: It’s been a challenging year for everyone. I feel so grateful that customers and small businesses are relying on us more than ever before. We have actually crossed a milestone and are working with more than one million businesses across the country on Amazon. We have more than 100,000 kirana stores and more than a million artisans selling on Amazon.
Just last year, during the pandemic, we had 150,000 sellers who came online and more than 4,150 of them became millionaires. Last year, in response to COVID-19, we also launched something called Local Shops, which has helped more than 50,000 local stores across 700 PIN codes become digital stores. We have more than 70,000 exporters now on Amazon and the total exports from the platform have crossed $2 billion. All in all, it is super exciting to see how businesses are embracing technology and thriving.
In terms of digitisation, everybody claims to have been front-ended by about ten years, like 2030 is here in 2020. How much revenue have you front-ended?
Well, we don’t really think about it that way. We look at how behaviour is changing. We look at how the priorities of our business and the parameters that define our success are perfectly aligned with India’s priorities. Digital India and Make in India are about digital empowerment and digital inclusion for the consumer and manufacturing, so that Indian manufacturing has reach across the world. Added to that, the pandemic has accelerated digitisation — the number of small businesses and shops who came online since COVID-19 is 50% higher than pre-COVID. Similarly, new technological features such as voice-purchasing on the Amazon app, more languages, videos to aid shopping and machine learning to shape experiences are getting more shoppers online. We are seeing significant growth in exports too. These indicate that this is a structural shift.
When Amazon started in the United States, you had a significant lead over the competition. Bezos himself went through several ventures that did not take off before he nailed the model, and since then, it has been a meteoric rise. Amazon has retained the lead in technology adoption and customer acquisition. However, that has not been your story in India. Now, you have a mightier player with loads of money entering the competition.
In terms of sales in India, we are the largest and most transacted marketplace. We are very peculiar in our obsession with customers and single-mindedly focus every day on providing better selection, greater value and more convenience than anybody else. Having said that, e-commerce is still young in India and there will be many models and winners, much like everywhere else in the world. Our job is to work hard so that, in a perfectly transparent world, consumers choose us. In the end, competition is good for the industry, customers and small businesses.
Internet businesses are largely turning out to be winner-take-all kind of businesses. With this in mind and the way the Indian digital ecosystem is evolving, how do you see Amazon creating a moat for itself and protecting its lead position here?
There are many presumptions that I don’t agree with. First, we have significant competitors across the world, including in the US, who are actually doing exceedingly well. Secondly, we are the leader in India. Third, this is so early that there will be many winners and models, and this is true across the world. It is not a winner-take-all business. In the US, during COVID-19, there were many different ways in which customers shopped and they included Amazon. However, the question of making customers trust us over others is a valid one. We take it as an article of faith that customers globally are similar for the most important things. There is no way that customers in India are going to tell us to offer them less selection at higher prices with slow delivery. So, it is in our interest to focus on increasing selection and convenience for customers and ensuring customers get great value.
When you do that on a daily basis on a large scale — we have seen across the world — it drives a lower cost structure for everybody in the ecosystem, adds more value for the customers, increases selection, and brings more customers and sellers to the website. This flywheel keeps spinning and drives relative differentiation. Prime is a great example, for which India is one of the fastest-growing membership geographies. It is a Rs. 999-per-year programme, which provides customers with free one-day delivery, free content through Prime Video and Prime Music, and other benefits. India has the highest engagement rate for Prime relative to other geographies.
In the US, Amazon has been trying automation in a lot of varied things, from warehouses and truck testing to drones for delivery. In India, however, the economics is different since it is labour abundant and is where capital is a little more expensive. So how is your technology strategy in India?
The reason for innovation remains the same globally, which is that you want to offer customers great selection, value and convenience. The mechanism to drive that will be specific to the geography. In India, inventions don’t have to be glamorous. You invent every day with small process inventions or with new products and experiences. We realised very early that the idea of getting large fulfilment centres may not be enough to get a great selection for customers, because of how India’s selection is distributed among millions of small and medium-sized businesses (SMBs). So, we invented this product which is called Seller Flex that converts a seller’s location into a virtual warehouse on the Amazon net and that allows customers to have one-day or two-day delivery. The seller doesn’t have to send the items to the physical warehouse if they cannot. By the way, sellers still prefer, when they achieve a certain scale, to sell their items to a physical warehouse because they just cannot sustain the scale. But when they’re getting started, this is a great way. That was the first invention for India and it worked so well that we took to the rest of the world.
Similarly, we launched transportation for Amazon in India called Easy Ship that allows sellers to benefit from a national transportation network. Our investments are in hard logistics — building delivery stations, fulfilment centres, a logistic arm and cloud service (CS) from Amazon. For consumers, we have Amazon payments in India, which we don’t do much the same way anywhere else. It was a deliberate attempt to drive payment inclusion. We offer cash load at the doorstep. You can actually load up money in your wallet and offer KYC at the doorstep.
Then, we use machine learning all the time, whether you are trying to help customers find a dress that fits or small businesses list their items with apt descriptions, like, if they don’t know the colour of a product they have, we can derive it from its image so that they don’t have to do the work. In a massively fragmented and early-stage landscape such as India, there is so much innovation to do and we have probably just seen the tip of the iceberg.
How are you viewing the grocery opportunity? Industry people are estimating it to grow from $2 billion to $20 billion over the next five years. Do you really think this is achievable, and how will Amazon capture this opportunity?
It is still very early in grocery. It is a large consumption category for the customers, but again, there would be many options for customers to choose from. We have millions of customers who have now adopted Amazon (Fresh for quicker delivery and Pantry for stocking up value buys) for their grocery needs but we found in the cities, where both offerings were present, customers wanted both services in a single order and that is what we are doing right now, in the top ten cities. It allows us to provide the largest selection available in two hours and to provide the greatest value on a per unit basis when customers stock up. But, as I said, it’s very early.
Would you be looking at some inorganic growth opportunities in this space?
We are always open to visionary companies that are doing a great job.
How about the apparel business? Again, that’s been a big story in India. Flipkart has hit pay dirt with Myntra. How do you see that? Would Amazon have to deliver a different experience to capture this opportunity?
Apparel was one of the later categories that we launched, but we have grown rapidly. We do have the largest, single-destination apparel business, though we don’t have other subsidiaries in the category. We are focused on helping mostly disorganised manufacturing units in India create brands, so that they can offer more quality, branded selection to customers. We focus on experiences that allow customers to have a more convenient shopping experience, such as fast delivery or a 30-day, no-questions-asked return policy. We focus on the small things such as data quality and using machine learning to help customers find the right fit or launching features such as StyleSnap, which allows them to upload a picture to find similar styles. We are super excited (about this category) and yet it is very early.
How do you think these categories are going to shape up? Five years ago, there would be horizontal platforms such as Flipkart or an Amazon or whoever, but now there are leaders in furniture or fashion or in other verticals. Have you ever considered verticalisation?
You don’t base your strategy on horizontal or vertical. You ask yourself what allows the customers to have a better customer experience. Customers will shop at many places, offline or online, or on brand websites, which is precisely why I have this premise that over a sufficient duration of time, there would be many winners. Our job is to ensure that we provide customers a superior experience so that when they have to choose, they choose us. Our focus is on the largest selection, the greatest value and the best convenience.
Post pandemic, would there be any changes or shifts in consumer behaviour? Have any new opportunities emerged?
The businesses in India have embraced technology and used the pandemic to reinvent themselves digitally. The rate at which small businesses are coming online is about 50% higher than pre-pandemic. We launched Local Shops targeted at the shops, and it has seen tremendous growth. We have onboarded nearly 50,000 local stores in 700 pin codes.
Now, on the consumer side, clearly, there is a trend of more people choosing to shop online even as some of the COVID-19 regulations have been relaxed. Therefore, there may not be an online-offline debate anymore because this pandemic has blurred the line between the two, with customers and businesses appreciating convenience. I think that trend is here to stay and another trend we are seeing is customers shopping more in their local languages. Amazon app supports transactions in five languages and a very meaningful part of our new customer base is people who use local languages. Finally, we have noticed that customers who are new to online shopping interact differently with the app. They tend to type less and look for easier shortcuts to get to what they want. So, we introduced Voice on the Amazon app, through which they can say maybe ‘pay my bill’, and they will be directed to the right place (tab or page). On the whole, the pandemic has accelerated digital empowerment and digital inclusion, and this is enabling innovations.
I understand that you have invested about $6.5 billion in India so far. What investment do you think will be made here over three to five years?
Our business priorities are so completely aligned with India’s priorities over the next few years, it’s like in sync. Our success is dependent on how fast we can digitally empower sellers and businesses, and how quickly we can drive digital inclusion for our customers. If we don’t do that, we won’t get growth. I find ourselves in a very lucky place, where these aligned priorities over time deliver hundreds of millions of customers, and tens of millions of businesses, all engaging with this growing marketplace. The opportunity is so massive that we don’t look at the investment amount, we look at the opportunity. We ask ourselves how we can accelerate this empowerment and inclusion of both, customers and businesses. A lot of the investments that you are talking about that we have made public are based on this. We will continue with that. In fact, we publicly pledged in early 2020 to digitise 10 million SMEs, to enable a cumulative $10 billion in exports and create one million jobs by 2025.
Amit, it’s amply clear that you are bullish on India. But do you see regulatory hurdles and is the domestic industries’ lobby proving to be a big challenge? How different is it from what you have faced in the rest of the world?
Every country we do business in has its own unique laws and nuances. India is no different and our responsibility as a corporate citizen is to ensure that we are in compliance with all laws of the land. And that’s where we start and, within that, we have to work hard to invent for customers and businesses. The good part is that our business priorities are perfectly aligned with the country’s priorities. We talk about ‘Digital India’ which is all about digital empowerment and inclusion, and we talk of ‘Make in India’, and online selling is the perfect way to drive global sales.
We find ourselves in a place where our efforts are good for the country and good for our business, and we continue to focus on that.
You have spent sufficient time with Jeff Bezos. What have been your biggest learnings from him?
I’ve been lucky to have worked closely with him for some part of my Amazon career. I have been with the organisation for 22 years and have seen things from a close quarter, but I was also his technical advisor for a couple of years and got to observe him closely. Three things stand out for me — one is customer obsession. He is truly obsessed with serving the customers. I have learned that you have to make hard promises and keep them, even when nobody’s watching so that you earn your customers’ trust. Second, invent on their behalf. You need to give the customers the experience that they care about and the only solution for that is invention. Third, you should be prepared to be misunderstood, you need to take risks, and you need to invest for the long term. Those are the three lessons I have internalised.