Jeff Bezos- One reason why Flipkart, Snapdeal will never be Amazon of India

Amazon is the fastest company to reach $100 Bn in Annual Sales and is cruising along to gain leadership position in the Indian Ecommerce Space. Meanwhile AWS reached $10Bn in annual sales, even faster. There primary reason why Amazon will be the Amazon of India is Jeff Bezos clarity of thought and leadership- Very well articulated in the letter to shareholders-

1. “Customer Obsession”
Both were planted as tiny seeds and both have grown organically without significant acquisitions into meaningful and large businesses, quickly. Superficially, the two could hardly be more different. One serves consumers and the other serves enterprises. One is famous for brown boxes and the other for APIs. Is it only a coincidence that two such dissimilar offerings grew so quickly under one roof? Luck plays an outsized role in every endeavor, and I can assure you we’ve had a bountiful supply. But beyond that, there is a connection between these two businesses. Under the surface, the two are not so different after all. They share a distinctive organizational culture that cares deeply about and acts with conviction on a small number of principles. I’m talking about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence. Through that lens, AWS and Amazon retail are very similar indeed.

2. The culture of Failing Fast.
One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.

3. Amazon is in India to win.
India is another example of how we globalize an offering like Marketplace through customer obsession and a passion for invention. Last year we ran a program called Amazon Chai Cart where we deployed three-wheeled mobile carts to navigate in a city’s business districts, serve tea, water and lemon juice to small business owners and teach them about selling online. In a period of four months, the team traveled 15,280 km across 31 cities, served 37,200 cups of tea and engaged with over 10,000 sellers. Through this program and other conversations with sellers, we found out there was a lot of interest in selling online, but that sellers struggled with the belief that the process was time-consuming, tedious and complex. So, we invented Amazon Tatkal, which enables small businesses to get online in less than 60 minutes. Amazon Tatkal is a specially designed studio-on-wheels offering a suite of launch services including registration, imaging and cataloguing services, as well as basic seller training mechanisms. Since its launch on February 17th, we have reached sellers in 25 cities.

4. Amazon is it’s own competition
Just over 10 years ago, AWS started in the U.S. with its first major service, a simple storage service. Today, AWS offers more than 70 services for compute, storage, databases, analytics, mobile, Internet of Things, and enterprise applications. We also offer 33 Availability Zones across 12 geographic regions worldwide, with another five regions and 11 Availability Zones in Canada, China, India, the U.S., and the U.K. to be available in the coming year. AWS started with developers and startups, and now is used by more than a million customers from organizations of every size across nearly every industry – companies like Pinterest, Airbnb, GE, Enel, Capital One, Intuit, Johnson & Johnson, Philips, Hess, Adobe, McDonald’s, and Time Inc.

AWS is bigger than was at 10 years old, growing at a faster rate, and – most noteworthy in my view – the pace of innovation continues to accelerate – we announced 722 significant new features and services in 2015, a 40% increase over 2014.

Many characterized AWS as a bold – and unusual – bet when we started. “What does this have to do with selling books?

2010 holidays shopping- Global Warming & Online Retail

US consumer’s spent 12{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} more than last year online; an aggregate of $32.6 billion over the holidays, reported comScore on Wednesday as it released the final numbers for this 2010 Holiday season.
It seems Global Warming is good for retailers as comScore credited blizzard for the boost in sales. Other contributors to the growth included earlier than usual promotions and aggressive free shipping offers, which were used in more than 50{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} transactions.

2010- Holiday Shopping- 12{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} over 2009
2010- Holiday Shopping- 12{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} over 2009

Cyber Monday, the monday after Thanksgiving (and the so-called start of the online shopping season) recorded the heaviest spending of the 2010 season and crossed the $1 billion threshold at $1.028 billion. Free Shipping Day (December 17, 2010) recorded the maximum jump (61{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c}) in sales over 2009

Cyber Monday and Free Shipping Day- Recorded Maximum Sales
Cyber Monday and Free Shipping Day- Recorded Maximum Sales

What’s the mantra for 2011?

1. Start the advertisements around your promotion early.

2. Get aggressive with shipping

3. Go Social, go Viral

4. Pray for bad weather? 🙂

E-Commerce in India- where’s the Tipping Point?

India is a $1.2 trillion economy (2008 estimates) and various studies and reports (let me correct myself there are not many!) peg the e-commerce Industry size between Rs.9, 000-10,000 Crores (i.e. Rs 90 -100 Billion which is about US $ 2 Billion)

India e-commerce Market Size
India e-commerce Market Size

On the other hand US is a $14.2 Trillion with the B2C ecommerce Market estimated at $ 220 Billion end of 2008 and is expected to shrink about 1.5{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} in 2009 and grow about 7{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} in 2010.

US B2C e-Commerce Market Size
US B2C e-Commerce Market Size

It does not take a more than elementary school mathematics to figure out e-commerce to the GDP ratio is not proportionate. Indian economy is about 7{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} the size of US economy and the Indian e-commerce market is only about 1{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} the size of US B2C e-commerce market.
e-commerce has not taken off in India for sure.There are questions abound. Why e-commerce in India not catching up with the other markets? Why a technology savvy population abstaining from the Internet? Is there money to be made in India’s e-commerce space?
Here’s a shocker take out online travel and Indian e-commerce market is about $400 million a mere 0.3{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} of the US B2C e-commerce market.

Do the likes of EBay India, Rediff, Indiatimes, Future Bazar, have a viable business model? ‘Build it and they will buy’ certainly does not work in India. A quick research on Alexa shows no significant increase in traffic for or in the last 6 months.

2009 Jan-June Traffic
2009 Jan-June Traffic

Elsewhere in the world various models of online commerce (comparison shopping, community shopping) is being tested. India is still waiting to reach the critical mass. What would be that killer e-commerce format for India?

I believe viable e-commerce models in India need 3 major paradigm shifts. Moving from ‘Caveat Emptor’ to ‘Trust the Consumer’ Mindset, Partnering and not challenging the Local Brands and Coming out of the American mindset.

Moving from ‘Caveat Emptor’ to ‘Trust the Consumer’ Mindset.
In India, unlike the west, Consumer’s Rights and Buyer Protection Laws are non existent. It is very difficult to return purchased goods. This is true for all formats of retail, virtual or real world. Not many stores have defined Return Policies and the default policy is ‘do not trust consumers’. Once a product is out of the store why bother if the consumer is unhappy.
e-commerce formats that go against the norm and ‘Trust the Consumers’ will definitely have an edge.
There are some very simple rules to follow to trust the consumer:

  • Share all product/ service information and avoid ‘need to know’ approach.
  • Look at things from consumer’s perspective.
  • Provide for misuse of trust by a fraction of consumers.
  • Go the extra mile to exceed consumer’s expectations.

Partnering and not challenging the Local Brands.
Mobile Telephony was the success story of the last decade. Organized Retail was touted as the Industry of this decade; however; none of the organized retail brands and formats are in the Green or anywhere close to projected Reach. Reliance Group, Future Group, Aditya Birla Group all included. After the initial euphoria of buying vegetables in Air Conditioned environment consumers are back to buying from the round the corner vendors or cart pushers. I see 2 primary reasons for the reverse migration, the Quality was never addressed the air conditioners went off due to power outages.
In the packaged food category the store labels (sold at discount) and bundled in promotions have not managed competing with the local brands.
This is a not post on the retail formats and I will not dwell further on their business models however e-commerce is a subset of commerce and I believe successful e-commerce models have a learning here. Partner Local brands!

Come out of the American mindset when H1 expires.
Most e-business in India are promoted or run by Successful Entrepreneurs and Professionals of Indian origin who have returned to India after their H1 (or whatever Visa class) expired or their employer saw a goldmine waiting to be tapped in the BRIC nations or when they decided to migrate back to expose their kids to Indian values.
These accomplished Entrepreneurs and Professionals bring with them years of experience in running e-business and try to recreate the success in India without an appreciation of the Indian dynamics. I call it the sub-domain approach. Take add the Tricolor and voila you have a running business
That simply does not work!
Once these models do not succeed and the entrepreneur starts running out of funds they use their Network to rope in a successful back from the US Indian origin Venture Capitalist.
After the PowerPoint honeymoon is over that partnership is a recipe for disaster. 2 individuals that have multiplied capital 100x in their earlier ventures more often than not do not have the willingness and skill to nurture a 5x business in India. If only these guys could work on !

To conclude I believe, model that addresses these three challenges will certainly manage to address the other stated drawbacks of the Indian system: ‘consumer’s want to see touch and feel’, payment infrastructure, broadband availability etc. The e-commerce entrepreneurs are experimenting with various formats and technologies. I believe the Tipping point is not very far off.