Amazon squares up to local ecommerce groups in India

Amazon squares up to local ecommerce groups in India

Amazon squares up to local ecommerce groups in India

                                                                        
When Ananda Mishra met Jack Ma at Alibaba’s headquarters last November, the Chinese tycoon had a piece of advice for the young entrepreneur from Bhubaneswar, a city of about 800,000 people in eastern India.“He told me: ‘Anand, you must focus on the smaller cities and towns — they’re untapped,’” said Mr Mishra, who established his ecommerce business Grozip in 2016.India’s largest technology and ecommerce start-ups are based in its biggest cities, with Bangalore and Greater Delhi accounting for the vast majority. For several years, the major metropolises also accounted for most customer growth in ecommerce, driven by prosperous urban elites.But with internet usage turbocharged by lower data prices, ecommerce growth is now fastest outside India’s eight largest “Tier-1” cities, and industry rivals are fiercely competing for a new wave of customers in provincial towns.Instead of moving to one of the established tech hubs, Mr Mishra is staying in Bhubaneswar to build a digital grocery service focused on long-neglected parts of India’s east.Ananda Mishra, founder of online grocery service Grozip, at a milk factory in Bhubaneswar. Milk is among Grozip's most popular categories as it seeks to attract first-time ecommerce shoppers in eastern India © Simon Munday/FT“Now people are leaving Mumbai and Bangalore to join us, because they can see we're growing at an exponential rate,” he said.Mr Mishra faces increasing competition from ecommerce giants such as Amazon, which has committed $5bn to what is now its most important market in the developing world — and is increasingly focusing on potential shoppers in towns like Bhubaneswar that have seen a huge recent surge in the number of people with internet access.
In a report last year, management consultants Bain estimated that 56 per cent of online product purchases were made in India’s nine biggest cities — but the picture is changing rapidly after new operator Reliance Jio triggered a collapse in mobile data prices. Other parts of the country, Bain predicted, would drive a dramatic increase in the ecommerce user base, which stands at just 160m in a country of 1.3bn.
The growth rate in these smaller towns and cities has already pulled far ahead of the biggest conurbations, said Kishore Thota, an Amazon executive overseeing the company’s drive to reach its “next 100m” Indian users. “For a year or so we’ve been seeing this huge growth differential from outside the metros,” he said.
The industry’s realignment is a boon for local shopkeepers such as Sagarika Samantha, whose small vegetable shop in central Bhubaneswar is bringing in an additional $200 a month by handling deliveries to nearby Amazon customers.
She is part of a drive by Amazon to smooth its growth in smaller cities by piggybacking on local shopkeepers, benefiting from their local logistical knowledge and trusted status in their communities. In another programme, branded Amazon Easy, small retailers in midsized towns are trained to help customers make their first online purchases using tablets in their shops.
“The personal touch with somebody might be the only way some customers will overcome the trust issue,” Mr Thota said.
Wariness among Indian ecommerce users means that Amazon offers them the option of paying in cash upon delivery, despite the resultant costs of cash management. This means of payment is still used in the majority of Indian ecommerce transactions, according to several industry sources.
The US company continues to search for new ways to pull lower-income Indians into its customer base. While they are gorging on cheap mobile data, most continue to use low-cost handsets with small memory capacity — so Amazon has launched Micron, a stripped-down version of its mobile app with fewer features and lower memory usage. Late last year it also launched a Hindi version of its platform, with the details of thousands of products painstakingly translated by a team of linguists.
Rivals are trying different gambits — such as Snapdeal, an ecommerce marketplace that makes 85 per cent of its sales outside the largest cities. To exploit the collapse in data prices, Snapdeal now features videos for its more popular listings, as well as “gamification” features that offer prizes through virtual scratch cards and spinning wheels.
Such features have been hugely popular among middle-income people in smaller cities, who tend to have more time available than harried big-city professionals, said Kunal Bahl, Snapdeal’s chief executive. “And bandwidth is almost free now,” he said, adding that the simplest explanation for this new surge in small-town ecommerce “is a single word: Jio”.
Jio’s promotion of cheap data may have given ecommerce groups a boost so far, but it is about to become a fearsome competitor. In January, its chairman Mukesh Ambani, Asia’s richest man, announced plans for a new ecommerce platform in which Jio would work closely with small offline shopkeepers and sister company Reliance Retail, the country’s biggest formal retailer.
While the scale and timing of Jio’s ecommerce launch remains secret, incumbents are moving quickly to gain a head start in the fast-growing small-town market. Flipkart, which was acquired by Walmart for $16bn last year, is focusing particularly on fashion — one major area where it has a clear edge in its battle with Amazon for Indian ecommerce leadership.
“You go to the local shoe shop in a Tier-4 town and they’ll have maybe three or four pairs from each brand,” said Sahil Barua, of Delhivery, the country’s biggest ecommerce logistics company, which has been ramping up its operations in midsized and small towns. “But people’s aspirations are no less than in the big cities.”
The growth of ecommerce in rural India has forced Delhivery to make heavy use of technology, to manage deliveries to customers in small communities who may not have formal addresses. Every time a courier delivers a package, he is required to mark the precise co-ordinates on a digital map, to speed future deliveries to the same place. 
“An address in some places can be something like ‘near the tree, behind the temple’,” said Snapdeal’s Mr Bahl.
Despite such challenges, the rapid growth of internet penetration in rural India — which stood at just 15 per cent in 2017, according to Bain — means the country’s towns and villages will only grow in importance to its ecommerce groups, he added.
“We’re still in version 1.0 of this market,” he said. “It’s far from conquered by any player.”

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