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  • The hype over the location of Amazon's HQ2 has died down, but the

  • e-commerce giant actually just opened its biggest office building yet.

  • This one though, isn't in the U.S.

  • The new campus is in Hyderabad, India.

  • It covers 9.5

  • acres with 1.8

  • million square feet of office space, making it the largest Amazon building

  • by total area.

  • It has the capacity to hold some 15,000 workers.

  • Even its headquarters, individual buildings in its hometown of Seattle,

  • can't hold that many people in one building.

  • The building out of the new campus in India just is another sign of how

  • committed Amazon is to the market, how aggressively they plan to invest in

  • the market, how much of a commitment they're making to India.

  • India is seen as one of the last major growth markets for the retail

  • giant.

  • Amazon began its retail operations in India back in 2013.

  • Since then, the company has invested more than five billion dollars into

  • the country. Now, the reason that Amazon is so interested in this market

  • is because it represents enormous untapped potential.

  • Right now, e-commerce represents just 3 percent of total consumption in

  • India.

  • While India's population has swelled to 1.3

  • billion, less than half are online.

  • The country recently rolled out its 4G network, and as Internet

  • penetration rates continue to climb, Amazon hopes to edge out local and

  • international competitors.

  • They're sinking a lot of money into India because the projections are

  • crazy. I mean, analysts say that this is a market that's going to be worth

  • 100 billion dollars by 2022.

  • However, Amazon faces steep competition from Walmart, which completed its

  • 16 billion dollar acquisition of domestic e-commerce company Flipkart in

  • 2018. Before the acquisition, Flipkart controlled an estimated 40 percent

  • of the Indian e-commerce market, bolstered by its fashion and apparel

  • brands. Now Amazon and Walmart are locked in a tight competition for

  • market share. Yet despite their growing influence, roughly 90 percent of

  • India's retail market is still controlled by small mom and pop stores.

  • These local retailers wield a lot of political power, which has led to

  • updated e-commerce regulations that make it much tougher for multinational

  • corporations to take on domestic competitors.

  • Direct to consumer sales were already banned for foreign-owned retailers,

  • leading Amazon and Walmart to set up a network of affiliate companies that

  • allowed them to continue selling their own products.

  • But after Walmart's Flipkart acquisition, the Indian government banned

  • foreign e-commerce companies from selling products through affiliates that

  • they owned a majority stake in and from negotiating exclusive deals with

  • sellers.

  • Amazon has a lot of its own private label products like the Echo, like

  • batteries, like a lot of things, and groceries as well, that it's trying

  • to sell in the Indian market.

  • So when the government put in regulations that said it wasn't able to even

  • sell its own products through merchants that it had a stake in, that led

  • Amazon to take down thousands of products on its website.

  • The New York Times estimated that Amazon would have to pull about 400,000

  • items in total, accounting for nearly a third of its sales in the country.

  • However, these regulations could only be a short term setback.

  • Some analysts say it's just a matter of time before Amazon finds clever

  • ways to reconfigure its business models and partnerships to comply.

  • Amazon is pouring a lot of money into the country.

  • Could that all be stifled by these regulations?

  • That is a big question.

  • I think probably Amazon is going to figure out a way to work its way

  • through the regulatory obstacles.

  • There's a reasonable track record they have of executing well despite some

  • obstacles, whether they are economic or cultural or logistic or

  • regulatory.

  • Amazon is already taking major steps to adapt by expanding its brick and

  • mortar presence in the country.

  • In August, it signed a deal to buy a minority stake in Future Retail,

  • which operates over 900 stores and owns several large supermarket brands.

  • With this investment, Amazon is really taking this hybrid retail approach.

  • By combining the brick and mortar, the localization of an Indian partner

  • and its own e-commerce experience, that's what Amazon believes will

  • hopefully lead it to success in this market.

  • The company is also expanding its online grocery business, AmazonFresh.

  • Now, grocery deliveries will be available in some parts of Bengaluru and

  • eventually in other cities too.

  • Food and grocery is by far the largest retail segment in India.

  • It is the biggest market in India.

  • It's almost 55 or 60 percent of household spends is still grocery items.

  • So, you know, without that, it's very difficult for Amazon to capture the

  • market.

  • Amazon also hopes to learn from past mistakes.

  • The company shut down its e-commerce operations in China this summer after

  • it failed to make headway in the market.

  • They faced really good entrenched competition from companies that did a

  • much better job fitting their products and their services to that market.

  • And so we're talking about JD.com,

  • and of course, Alibaba.

  • In India, it's taking a different strategy.

  • There's more of an emphasis on rural customers.

  • In fact, 80 percent of Amazon's customers currently in India live outside

  • of the country's biggest cities.

  • Amazon has actually set up these sort of really tiny stores in rural areas

  • so that Indian customers can go in and actually learn how to purchase

  • things and order things on their smartphones.

  • Now, Amazon even offers an alternate version of its app designed to run on

  • inexpensive smartphones with spotty Internet access.

  • It also launched its Hindi website last year and hopes to add a variety of

  • regional languages soon.

  • But whether it's designing new apps, setting up small brick and mortar

  • retail stores or building huge new campuses, these long term investments

  • don't come cheap. And it may be awhile before these efforts are reflected

  • in profits.

  • Look, it's going to be a very expensive market and I think they're willing

  • to sustain losses in that market for a long period of time, I would guess

  • 10 years. So I think we still have several years ahead of losses.

  • Amazon's international e-commerce unit consistently operates at a loss.

  • But as growth slows in North America, the company hopes that eventually

  • India can be another cash cow.

  • When you think about Amazon opening up a campus for 15,000 employees

  • anywhere else, it wouldn't be able to fill it.

  • I mean, Amazon's international business can be doing well in Europe and

  • Australia, but it needs a big market like India for its future growth.

The hype over the location of Amazon's HQ2 has died down, but the

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Can Amazon Succeed In India?

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    up1217home   に公開 2019 年 09 月 08 日
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