Amazon to follow marketplace model

Starting with books, movies and video products, Amazon.In will introduce additional categories in coming weeks

The Seattle-based Nasdaq-listed e-commerce company Amazon today entered India by launching its marketplace model, offering up to 25 to 30 per cent discount on products and the option of paying by cash on delivery. The move came after years of preparation and 16 months of getting a foothold in the country through Junglee.com, a price comparison site it had acquired.

The $61-billion e-commerce giant, a rival to retail majors like Walmart in the international market, has begun with books, movies, and TV shows’ video products in the country. It will introduce additional categories, including mobile phones and cameras in the coming weeks.

Amazon’s entry into India means that all the four of the world’s most influential technology companies are now here. The other three — Apple, Google and Facebook — already have India presence, while Amazon already has a significant back-office set-up in the country.

As foreign investment is prohibited in e-commerce, Amazon stayed away from the India market till launching Junglee.com in February 2012. Now, it has come in through the marketplace model, which is about enabling third-party sellers to reach customers. Amazon, a combination of a pure-play and marketplace player, operates the marketplace format in 10 countries, including the US, Canada, Japan, UK, and China. Companies working in the marketplace space do not have to comply with the foreign direct investment (FDI) restriction, as these entities do not own inventory, a definite factor determining if one is a retailer.

Another American online giant, eBay, a rival to Amazon, is also a marketplace player in India, besides some other markets. It operates an online auction and shopping site. Also, Flipkart, a leading e-commerce player in India, recently shifted to the marketplace model from being a pure-play online retailer. Snapdeal is yet another example of an online marketplace firm operating in India. While eBay is a foreign-owned company, both Flipkart and Snapdeal are funded by global private equity companies.

Describing Amazon as “a formidable competition”, Technopak Advisors Chairman Arvind Singhal said the American company had entered India under the marketplace model as FDI was not permitted in e-commerce. “It is a matter of time before the company offers its entire range — a blend of own inventory-led model and marketplace,” he said. It can come with its own inventory-led model only when India permits FDI in e-commerce.

AMAZON’S DEPTH
200 million: Global active customer base
2 million: Active sellers on company’s marketplace
$61 billion: Global revenue
40%: Share of marketplace format in global business
10 countries: Presence under marketplace model. These include US, Canada, UK, Japan and China
178 countries: Customer base scale
30: Listing categories globally