If you look at the Amazon logo, you will notice a smiley-like arrow at the bottom that goes from ‘A’ to ‘Z’. It takes only six letters for the ecommerce company to convey two deep meaningful messages to potential customers — one, “we aim to provide you with all the products you need” (Amazon is said to be the longest river in the world) and two, “we want you to have a delightful shopping experience.”
This kind of nuanced yet efficient messaging can be expected from a tech behemoth that recently entered the trillion dollar-club, becoming the second US-based company after Apple to achieve this kind of market capitalisation. The Seattle-based is reportedly scouting for new headquarters.
As absurd as it sounds, Amazon still considers itself a startup and wants to keep spearheading its meteoric rise. And India — with its huge userbase (close to 329.1 Mn people are projected to buy goods and services online in India by 2020) and rising Internet penetration (635.8 Mn by 2021) — presents itself as an oasis of opportunities in a global market that is fast turning into a desert of regions with diminishing growth potential.
Inc42 recently sat down with Gopal Pillai, Director & GM, Seller Services, Amazon India, on the sidelines of an event organised by Amazon to outline initiatives related to its Great Indian Festival sale that starts today (October 10) and ends on October 15, in the lead up to Diwali next month. Sitting in a room situated on the ground floor of a three-storied house that’s furnished to the nook with everything bought from Amazon.in, Pillai speaks to us about Amazon’s efforts over the years to attract more sellers to its platform and explains the workings of Amazon’s magic Flywheel — a business model that was first designed in the 90s and continues to power the company’s businesses even today!
The Amazon Flywheel, which the company has dubbed as ‘The Virtuous Cycle’, is an economic engine that uses growth and huge scale to enhance the customer experience through greater selection and lower cost. Amazon first applied its magic flywheel to its e-commerce business before expanding it to fulfillment and cloud services. While it is not exclusive to the ecommerce company, it is a key factor in its success globally.
If you see the Amazon Flywheel, sellers play a critical role in bringing selection to customers, Pillai explains, as he outlines some of the key programmes that Amazon has run to attract sellers. This is in reply to a question posed by Inc42 about what new steps Amazon has taken to beat its rivals, especially after how some estimates had pegged Flipkart to have taken an edge over Amazon in last year’s Diwali sales. Unsurprisingly, Pillai claims that Amazon’s internal metrics begged to differ, but he doesn’t elaborate further.
According to the Amazon Flywheel, a strong customer experience will lead to more shoppers, which will, in turn, bring more sellers. More sellers will lower costs and prices through competition while bolstering selection for customers. Lower prices and more selection will bring in more customers. And the cycle repeats itself over and over again.
It’s not a surprise that Pillai starts the conversation with a reference to the Flywheel because a critical part of Pillai’s role at Amazon is handling the onboarding of SME sellers on the platform.
More than 90% of Amazon sellers in India are SMEs, a category so large that it might well be the deciding factor in who emerges as the biggest ecommerce player in India. SMEs are an important part of the Indian economy and contribute more than 40% to India’s exports, employing more than 40% of is workforce.
Amazon: Helping SMEs Create Brand Names With ‘Select’
The festive season in October, marked by Diwali, Durga Puja, and Navratra, is by far one of the most important holiday seasons for ecommerce players in India. It is the season of festive sales, which is one of the major litmus tests for these companies to prove their dominance in the Indian market.
Daily shipments are expected to surge past 3 Mn during the festive season this year from an average 2 Mn from a year ago. We’re talking more than double the number of shipments on a regular day — ecommerce shipments in India average between 1.2 Mn-1.3 Mn.
In the lead up to The Great Indian Festival, Amazon has launched the ‘Select’ programme, which is aimed at helping entrepreneurs in the SME category create brand names for their products. The programme seeks to assist entrepreneurs by helping them with strategic inputs about brand development, giving them product/customer insights, ensuring discoverability of their products, and other tools. Amazon has 100 brands that will be featured in Amazon Select — Yoga bar, The Yaya Cafe, Soul Fit, and Skin Elements are a few of them.
“If you think about Amazon India for the last five years, we started with just 100 sellers. Today, we crossed 400,000 sellers in the marketplace. This is exciting because it took us almost three-and-a half years to reach 100,000 sellers, after which it took us 11 months to reach the next 100,000 sellers and then, within the next 15 months, we doubled that number to 400,000,” says Pillai.
Amazon’s other effort to entice sellers is through an invite-only programme called Lending Network which enables sellers to get access to a capital. Pillai explains that gone are the days when SME sellers had to go to the bank, wait in the line, and plead to the manager for loans. Pillai claims that sometimes sellers get instant loan approvals, with the maximum time to get loan approval and the amount transfer being capped under three days.
Amazon Magnetising Seller Attraction
Amazon has also focussed in perfecting its mobile app for sellers — something that sets its India offering apart from other countries. Pillai explains the reason behind this move by pointing out that a mobile is a secondary device around the world but, in India, it is the primary device. “So, we created a version where a seller can register with the mobile app whereas in other countries that does not happen…a seller can take a picture on the phone and get their product listed, it’s that simple,” says Pillai.
But getting sellers listed is one thing, and helping them sell is another.
According to Pillai, tier-two sellers and even some tier-one sellers find it hard when it comes to uploading pictures of the product and writing product descriptions. So, Amazon has set up something called a “service provider network”, which is a parallel marketplace where sellers and service providers can connect and offer services to entrepreneurs, helping sellers present their offerings in exchange for a pay-as-you-go model.
The Seller University programme lists step-by-step instructions for existing and new sellers to guide them through their journey on Amazon.” We identified 750 use cases where sellers would need help and created videos for those use cases, input them in five languages — English, Tamil Hindi, Telugu and Kannada with 7,500+ views a week.
The programme also provides online and offline training (Amazon Classroom) to sellers through various modules addressing the basics of online selling,” Pillai says.
Amazon is also leveraging its global reach as an incentive to attract sellers to the platform. At present, 37,000 sellers transact on its global sellers’ platform (the number also includes sellers who only cater to foreign markets).
“Today, there is a person in Namakkal in Tamil Nadu who is selling thousands of T-shirts and bedsheets to consumers in New York and London,” says Pillai.
Some of the products from India that are popular on the global Amazon platform are bedsheets, leather goods, jewellery, T-shirts, etc. Some Indian products are also finding use cases abroad that they weren’t designed for — for instance Chandrika soap being used as a shaving soap (who saw that coming) and Indian bedsheets are being used as couch throws and beach throws.
“I attended a conference recently and I met Bala Sarda of Vadham Teas, whose family has been in the tea business 84 years. He wholeheartedly credited Amazon for growing his business 4X in three years,” says Pillai.
Basically, if you are an Indian seller, Amazon wants you to know you can set up shop anytime, anywhere on its platform.
Who’ll Taste Sweet Success? Amazon Or Flipkart? Or Paytm Mall?
All these efforts being made by Amazon to woo sellers will not count much if the sales don’t reflect the astronomical rise in the number of sellers, with Flipkart lurking in the bushes, ready to pounce on its customers, sellers, and market.
According to a report, Flipkart’s rate of addition of new sellers has doubled in the last six months, in the run-up to its Big Billion Days sale, also starting on October 10.
“We have more than 1 lakh registered sellers. In the last six months, we have (seen) new sellers going live on Flipkart doubling (in number),” Nishant Gupta, Senior Director Marketplace at Flipkart, was cited as saying by Business Standard.
Flush from its acquisition by Walmart, a old rival of Amazon from the US, Flipkart has launched its biggest-ever advertisement campaign to double its sales target to $1.5-$1.7 Bn during the upcoming Big Billion Days sale.
Flipkart has reportedly pumped in around $27 Mn (INR 200 Cr) on festive media expenditure alone aimed at the buyers, a big part of which is celebrity endorsements like that of actors Amitabh Bachchan and Deepika Padukone and cricketer Mahendra Singh Dhoni. Flipkart clearly wants its customers to know that it has the star power, and in a country where a lot of stock is put in celebrity endorsements.
Joining the festival sale competition is Paytm Mall, decacorn digital payments company Paytm’s ecommerce arm. Paytm, which is just in its second year of festive sales, today announced that it has forgone commissions from mobile, laptop, and large appliance retailers during for its festive season sale.
The online retailer’s major sale event, called the ‘Maha Cashback Sale’, coincides with Flipkart’s Big Billion Days and Amazon’s Great Indian Festival and will run from October 9-15. Paytm Mall is also backed by China’s Alibaba Group.
Amazon has not quite taken this route and will be counting on its enhanced product offerings to be the deciding factor in the festive sales. It started to prep for the Great Indian Festival sale in February-March of this year, Pillai told Inc42.
The upcoming Amazon-Flipkart festive face-off is increasingly looking like a nail-biting final or semi-final football match. Only, the pitch will be online this festive season, as the showdown between the top ecommerce players in India begins.
Amazon is keeping fingers crossed that its seller card helps it triumph over all others.