Why Amazon Failed to Understand India? - Business Case Study

00:00 - Intro
02:00 - Arrival in India
03:21 - Strategy in India
06:16 - How is it Failing?
12:05 - Future of Amazon

Amazon's journey in India has been marked by both promise and challenges. In 2015, Jeff Bezos declared India as Amazon’s most crucial market after the US. India, with its rapid economic growth and emerging e-commerce landscape, appeared to be a perfect opportunity for Amazon to extend its global dominance. Initially, Amazon invested heavily, pouring over $5 billion into its operations, and significantly shaping the country’s e-commerce sector alongside Flipkart. Amazon's infrastructure, customer experience, and seller services helped the company gain a strong foothold, especially in tier-1 cities, positioning it as a major player in India's e-commerce landscape.

However, in recent years, Amazon's growth in India has slowed, and it is facing significant competition from newer players like Meesho, Zepto, and Blinkit. In FY-23, Amazon India’s revenue grew by only 3.4%, the slowest growth in its history. One of the primary reasons for this slowdown is the shift in India’s e-commerce landscape. India is not a homogenous market but is divided into different segments based on income and consumption patterns, often referred to as India 1, India 2, and India 3. Amazon initially targeted the premium segment, India 1, which accounted for a small portion of the population but the majority of the country's consumption. However, by 2017, this segment started reaching saturation, and the growth in e-commerce began shifting towards tier-2 and tier-3 cities (India 2 and 3), which have different needs and behaviors.

The arrival of Reliance Jio and the subsequent rise of internet penetration brought millions of new consumers from smaller towns online. These consumers, however, were more price-sensitive and less familiar with online shopping, and Amazon failed to adapt quickly to their needs. Meesho capitalized on this gap by introducing innovative solutions, such as selling through WhatsApp groups and enabling local resellers, which built trust and made online shopping accessible for this new wave of customers. Meesho’s zero-commission model and faster payment cycles for sellers also gave it a competitive advantage, especially among smaller sellers.

Another challenge for Amazon is the rise of quick commerce in India. Post-pandemic, companies like Blinkit revolutionized the market by offering 10-minute grocery and product deliveries. This sector, which didn’t exist a few years ago, is growing at an explosive rate, with Blinkit already being valued at $13 billion—half of Amazon India's valuation. While Amazon has always prided itself on fast delivery, it has yet to make significant moves into the quick commerce space, leaving it vulnerable to competitors.

Furthermore, government regulations have added to Amazon's difficulties. India’s regulatory environment is increasingly cautious of foreign dominance in crucial sectors like e-commerce. In 2019, new rules prevented companies like Amazon from selling products from brands in which they held a stake, forcing Amazon to remove hundreds of thousands of products from its platform. The Indian government’s push for a more open and competitive e-commerce sector, through initiatives like ONDC, also threatens Amazon's future in the country.

In response to these challenges, Amazon is now shifting focus to other sectors, such as cloud computing and digital payments. However, Amazon’s core e-commerce business remains essential to its overall strategy, as it serves as the distribution network for its other ventures. If the company cannot regain its momentum in e-commerce, its ability to expand into new areas may also be hampered. Despite the setbacks, the future of Amazon in India remains uncertain, and it will need to rethink its approach to compete in this rapidly changing market.

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