post Monday January 27, 2014
India is searching for ways to boost foreign investment in their country after several years of disappointing economic growth. An investment bank in Hong Kong estimated that the country’s e-commerce market will grow from $3.1 billion to $22 billion in the next five years
Due to the great opportunities that lie in India, companies such as Amazon and E-Bay are interested to invest in the large Asian country. However, until 2014 they had to deal with strict rules which made it very difficult for foreign companies to warehouse their inventory on Indian soil or even selling it to the billion customers in India. That is why the most probable solution to boost India’s economy right now is to relax the regulations for online retailing. India’s Department of Industrial Policy and Promotion asked e-commerce companies to register their opinions by the 30th of January.
The vice president of Amazon in India says that American companies are pushing the Indian government to change their rules. Although they are waiting for the Indian government to take a decision, U.S. companies are already doing business in India. They invest in e-commerce startups and build local warehouse-businesses and also deliver and store goods on behalf of Indian merchants, which is allowed.
The pioneer of e-commerce in India is Flipkart, but the absolute market leader in the one billion people country is Snapdeal. The latter company lists 20,000 sellers and over 4 million products. Kunal Bahl, CEO of Snapdeal, thinks that the key to their growth is that 90 percent of their assortment is not comparable to other e-commerce companies in India. Snapdeal is even expecting a growth of $1 billion in sales this year. Flipkart says it will reach the same amount of sales in 2015.
Amazon is trying to break the hegemony of Flipkart and Snapdeal in India, and established an Indian online marketplace in June 2013. Merchants can exhibit their goods on this site and pay Amazon remunerations to store and deliver their wares for them. The online marketplace already has more than 2,300 sellers and lists 440,000 products. Although this amount of products and sellers is more than Flipkart, the distance between Amazon and market leader Snapdeal is still enormous.
Analyst Rajiv Prakash, founder of NextIn Advisory Partners which advises Indian startups, says that in order to attract local merchants, foreign companies need to keep improving the speed and range of deliveries, and so the American company did. Amazon collaborated with an Indian postal service in November to deliver packages to remote locations. In December, the Amazon guaranteed a next-day delivery for certain products in six major Indian cities. Remarkably, both Flipkart and Snapdeal followed the example of Amazon by introducing the same service in Mumbai.
However, the hunger for growth of Amazon did not stop with the delivery services. The company said, on the 20th of January, that it plans to open a warehouse in Bangalore of 150,000-square-foot to speed deliveries, it is the same size as the one they already maintain in Mumbai.
A report from India’s industrial policy department said that easier and open rules will drop and will lead to more efficient supply chains. However, there are also concerns that the SMEs in India cannot compete with the buying power and advanced technology of Amazon or EBay. The industrial policy department predicts that the Indian market is not yet ready for foreign investors. Even though the foreign companies are lobbying heavily, there are no guarantees that their efforts will result into direct sales.
Source: Businessweek
Image courtesy of Somchai Som /FreeDigitalPhotos.net
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