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DELIVERING THE GOODS

Fishing boats to small stores, Amazon will stop at nothing to win in India

By Devjyot Ghoshal, Itika Sharma Punit
Havelock/Gauribidanur/LudhianaPublished Last updated This article is more than 2 years old.

Before any Amazon parcel arrives at Sahiba Ashraf’s creaky wooden balcony on Havelock Island, it undertakes an extraordinary journey by road, air, and sea.

The trip begins, like any other Amazon delivery, from inside a cavernous warehouse, where the item is picked up and transported by road and then by air to Port Blair, the capital of the Andaman and Nicobar Islands. It travels by truck to a small, two-room Amazon delivery centre, where it is carefully sorted and bundled into a large white delivery bag. Then, at a roadside wharf at the other end of Port Blair, the bag, stuffed with Ashraf and others’ parcels destined for the island, is carried onto a small, wooden fishing boat.

Half-a-world away from autonomous warehouse robots and complex algorithms, the boat, open to the elements and powered by a noisy, ancient engine, travels 70 kilometres in five hours across the Andaman Sea. On a beach at Havelock Island, home to less than 20,000 people, the Amazon bag is unloaded, its contents sorted at a small office, and the parcel is finally taken by scooter to the scuba diving centre where Ashraf is an accountant.

“The first thing I ordered on Amazon was a camera. It came in good condition, and it came in four days,” said the 31-year-old. “The product came in four days from the mainland to Andamans,” she emphasised incredulously on her experience from a few years ago. “And at the same price.”

Before Amazon arrived on tiny Havelock, best known for its pristine beaches and breathtaking scuba diving, it could take weeks or even months to get hold of something from the mainland, and usually at double the price. Most e-commerce sites would deliver only up till Port Blair, the capital, an hour-and-a-half away by the fastest ferry.

“In Havelock, you only get tourist items, like swimwear and shells,” Ashraf explained.

But why on earth would the world’s largest e-commerce company be interested in serving a tiny island in the Andaman Sea?

A contest like no other

Amazon set up shop in India five years ago.

Despite being a late entrant—local rival Flipkart was launched in 2007—the US behemoth is now among the top two e-commerce companies in the country. Its founder and CEO, Jeff Bezos, has committed $5 billion towards investment in India.

Why the interest? Because India has one of the world’s fastest growing e-commerce markets, slated to expand fourfold to $150 billion by 2022.

Already, the country is a pretty big deal for Amazon. The exact numbers are hard to discern, but there are some clear indicators.

During the June-September period this year, for example, the company announced that its international sales growth dropped to 13%, compared to 30% a year ago. Much of it was because Diwali, a Hindu festival that marks the peak sale season in India, fell on a later date this year.

It’s not that Amazon has had a free run in India. It fought tooth and nail with homegrown players, including Flipkart and Snapdeal, to corner a significant slice of the market, and the contest is showing no signs of abating. In May this year, US retailer Walmart spent $16 billion to buy a 77% stake in Flipkart.

“Walmart’s entry does incrementally make it difficult for Amazon compared to what it was when Flipkart was just Flipkart,” said Yugal Joshi, vice-president at Texas-based consulting and research firm Everest Group. “It is not just about Walmart’s money. It has a lot to do with the know-how, expertise, and technology optimisation capabilities that Walmart has. Among other things, Walmart is known to run very evolved supply chains and they will bring that to India.”

Fixing the fundamentals

On a February morning in Gauribidanur, a small town some 75 kilometres from India’s tech hub of Bengaluru, Naveen Kumar is manning his StoreKing outlet, complete with a laptop and flat screen TV. StoreKing is one of the retail chains in the hinterlands that Amazon has partnered with for its assisted shopping service, Amazon Easy.

Launched in 2015, and codenamed “Project Udaan,” Amazon Easy is focused on getting the next 100 million Indians, with little or no experience of online shopping, to buy on Amazon. Partners at these stores help potential customers navigate the Amazon website, place orders, and sometimes even coordinate deliveries. Amazon Easy is currently available at over 14,000 stores in 21 states.

Sales have been brisk for around six months since Kumar started, especially during the big nationwide discount sale, but there is a pile of opened Amazon boxes in one corner of his store. “I don’t know how to return these items,” the 30-year-old said. “There are shoes and clothes that people ordered and they don’t fit them. So they have left them at the shop and I have been trying to find a way to send them back.”

He has put some such items for over-the-counter sale at his store, including a defective mixer-grinder that Kumar got repaired locally, spending his own money. But this isn’t quite how Amazon Easy is supposed to work—the partner is supposed to hand over items for returns during the next round of deliveries—underlining the challenge of involving local store owners in last-mile delivery.

Six months later and 2,200 kilometres away, Banveet Kawatra is manning his father’s Amazon Easy store in the heart of Ludhiana, Punjab. It opened in May this year after senior Kawatra was told about the opportunity to partner with the online retailer by former telecom executives. Sales have been solid so far. For instance, in just a week during a discount period earlier this year, the 19-year-old says he sold mobile phones worth Rs19 lakh.

“The biggest challenge from offline to online is being able to give them maximum discount, so they feel things can be bought within their budget,” he explained. “The common person wants maximum savings, so wherever they can get it cheaper, they’ll buy from there.”

Far and wide

Amazon understands that price matters, which is why it continues to offer discounts even at the cost of bludgeoning its balance-sheet. But there’s a lot more that goes into its strategy.

“We do a lot of research in India to figure out what the barriers are. There are language barriers, trust barriers, comprehension barriers,” Kishore Thota, director for marketing and customer experience at Amazon India, told Quartz. “Geographic distribution is a barrier.”

Amazon, in fact, has a team called “Reach” that works on expanding the retailer’s reach across the length and breadth of the country. Besides just expanding its delivery capabilities—it now has over 50 fulfilment centres across 13 states with a total storage capacity of 20 million cubic feet—Amazon has forged partnerships that could help it meet this ambition.

In 2013, it partnered with the Indian postal services, the largest in the world, for deliveries. Then, in 2015, it launched “I Have Space” under which kirana shops can store Amazon’s packages and, for a fee, deliver to customers within a two-to four-kilometre radius. Now it can send packages to all of India’s deliverable pin codes, just like rival Flipkart.

“Amazon is doing reasonably well at localising to meet Indian needs,” Joshi of Everest Group said. “My thinking is that they have identified areas they want to work on in the future. And they have the cash to sustain any such efforts.”

Sabiha Mulla, a PhD graduate from Mumbai University, is likely part of the plan. In 2015, the former travel industry professional wrote to Amazon asking for their help to start delivery operations in the Andamans, where she moved after getting married. She had surveyed the market, anticipated demand, and hoped to hit about 50 packages a day after three months.

In the summer of 2015, Mulla and her business partner, Manzoor Ahmed, began operations as Amazon’s service partner. From a 200-square-feet office and with two delivery boys, they breezed through their target in a hurry. “I’m not even sure when…we were so focused on the service,” Mulla admitted.

On most days, Mulla and her team now handle 30 times their initial goal, with 20 delivery boys, out of a 1,500-square-feet office. During peak season, the volumes go even higher. Some of that demand comes from Havelock Island and shoppers like Ashraf.

“It’s not impulsive buying,” said Mulla. “It’s essential buying that happens on Amazon, especially here in the Andamans.”

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