~ By Kavita Ogale
UPDATE: Amazon has stepped up its investment in India and pumped in US$402,920,000 (Rs 2,800 crore) on 7th June.
Amazon may be pulling out of China’s US$1.3 trillion e-commerce market but the game’s not up for the Seattle-based behemoth as it focuses on cross-border shopping with more and more Chinese seeking to buy branded and luxury products. E-commerce regulations in China favour this upcoming trend.
Cross-border shopping has gained relevance recently due to Chinese consumers’ growing discontent with local products whose quality and safety may be circumspect. The value of this market is rising by 15% year on year, reinforcing the fact that customers in China are willing to invest their faith in brands that promise value for money. Buying directly from the manufacturers may often prove cheaper for consumers seeking cost-effective imported deals. The assurance of buying original goods is often given more emphasis over a possible shipping delay. Amazon will be looking to cash in on this social media-driven trend of shopping for brands that are coveted internationally.
Across the border, Amazon India grapples with rigid e-commerce regulations, stiff competition from arch rival Flipkart which boasts revenues of US$3.8 billion and the looming entry of Indian billionaire Mukesh Ambani’s e-commerce giant. The collaboration between Reliance Retail and data arm Reliance Jio Infocomm will massively increase data access to millions in rural India pushing products exclusively from Reliance Retail to a million+ captive audience hooked on his data network. That this deal has the new government’s blessing, will only aide Mr. Ambani in squashing his rivals and giving Amazon India a real run for its money.
Amazon India nonetheless, still has some ammunition left in its arsenal. Bezos‘ strategy aims at upping its e-commerce to US$5 billion by reaching another 100 million consumers in 2023. The plan includes tapping on the resources of local shopkeepers, making available a lower version of its mobile app that consumes less memory to appeal to users of cheaper mobile phones, boosting its rural merchant count while offering great discounts and a wide array of products. With so much intensive competition within the sector, India’s thriving e-commerce pie is expected to be worth US$200 billion by 2028 (as per a Morgan Stanley estimate).
Amazon’s experience in both China and India unfolds an interesting insight into our retail worlds. Although both nations have a billion plus consumers, their e-commerce trajectories have been quite different. With China’s population ageing fast and India’s median age being 27.9 years in 2018, Chinese and Indian consumers although often clubbed alike, are different by nurture.
With the trade war between China and the US worsening, China will look to India to offload some of its goods. China might have an advantage, by having a more mature understanding of the e-commerce sector, but will have to play her foreign policy cards right to strike a deal in India, especially with a strong domestic incumbent. Then again, Beijing is familiar with squashing monopolies.