Amazon plans to shut down 2-hour delivery app 'Prime Now' in India

Amazon has leaned heavily on groceries to drive Prime Now in the US

Global e-commerce giant Amazon is planning to shut down its Prime Now app in India, after failing to gain traction among Prime members and not being able to refine the business and logistics model in the country, sources in the know said.

The Prime Now app sends, at no delivery charge and in two hours, stuff such as groceries, electronics, home, and kitchen essentials in select cities to members of Amazon Prime, a paid subscription service. Amazon India has around 10 million Prime members.   

While the fate of Prime Now is still unclear, it will most likely be scrapped and added as a vertical to Amazon India’s main shopping app, the sources said. The other option being considered is that the app will be used for certain services for the time being and kept as a standby to be scaled up later when the market is more mature for it, they added. 

To a detailed questionnaire, Amazon said, “We do not comment on what we may or may not do.”

The company, which was bullish about its two-hour delivery service until recently, is facing a host of problems in running the app. From difficulties in sourcing fresh produce to finding reliable suppliers for groceries, the company has not been able to nail the right set of vendors for the service. “They have been cutting down on the Prime Now service for the last few months. The service was not able to find many takers and the whole idea of delivering fresh produce was not happening. The company plans to shut the service and run the grocery programme through the Amazon India app,” said a source who was part of the discussions.

 A number of reasons led Amazon to think about Prime Now’s scrapping. “While Amazon is used extensively in the country, not many people got the hang of the two-hour delivery service,” said a source close to the company. The company also had way too many irons in the fire. It has Prime Now, Amazon Pantry, and the main app. All three sell FMCG products. “This creates confusion in the mind of the user. ‘Where do I have to go buy things? What is the right place?’” said the head of marketing at a major e-commerce company.

But even when it did manage to hook a few customers on Prime Now, it couldn’t convince them to buy enough fresh produce regularly. “Indians want to buy fresh vegetables and fruit from local vendors. It is a matter of trust and habit. It is correct to say people do not have time. They make time for this,” said the founder of a now-defunct grocery start-up. 

So, if people didn’t buy fresh produce, what did they buy? “FMCG. And the margins in those orders are low,” said one of the people mentioned above.

Amazon’s grocery experiment in India has also been under pressure from the likes of BigBasket, Dunzo, and now Swiggy. All three have been able to hold the customer’s attention and wallet share.

Amazon now wants to tie up with local retailers to decrease the time and reduce redundancies. It could also take the acquisition route to win back customers.