When Jeff Bezos donned a bandhgala jacket two years ago and posed for photographs in India, he wasn't just promoting Amazon.com Inc.'s year-old business in the country. The web retailer's chief executive officer was also putting his reputation on the line to break into the
emerging e-commerce market
Now, with 80 million products for sale, 120,000-plus merchants and more than two dozen warehouses, Bezos's protégé Amit Agarwal is aiming to make Amazon the country's top online store by sales ahead of the Diwali shopping season. Known as the "festival of lights," the run-up to the celebration is India's biggest retail event, when consumers buy everything from clothes and electronics to jewelry and cars. Indians will spend as much as $1.7 billion online during Diwali this year, according to RedSeer Consulting.
Flipkart Ltd., India's top web retailer, and local rival Snapdeal, are well aware that they're facing a critical test this year amid Amazon's onslaught. All three are flooding newspapers, billboards and TV shows with ads and are offering discounts for Diwali, which now makes up a third of annual e-commerce sales. At stake is the future of India's online shopping market, as well as Amazon's global expansion plans, which had faltered after it failed to conquer China.
"This season could decide who'll be the ultimate winner," said Haresh Chawla, a Mumbai-based partner at private equity firm India Value Fund Advisors and an angel investor. "The loser will get unnerved and the victor can build internal confidence and rally the troops for the bigger game."
Reaching consumers in India has never been easy—just ask Unilever NV or Procter & Gamble Co., which spent decades making inroads into the market. There are 22 official languages, and consumption habits differ from place to place. On top of that, there are supply chain inefficiencies, high real estate costs, lack of skilled workers, along with poor infrastructure and labyrinthine regulations.
Even so, the prospect of becoming the main web store in a country of 1.25 billion people who are just learning how to shop online is tantalizing. RedSeer Consultancy Pvt. estimates that annual online sales will be $80 billion to $100 billion by 2020 from the current estimate of about $13 billion.
"Barely 2 percent of the population shops online," said Mrigank Gutgutia, who covers consumer internet trends at the Bangalore-based researcher. "It is still only the tip of the India e-commerce iceberg."
Merrill Lynch estimates that Amazon may sell as much as $81 billion in merchandise by 2025, up from $3.7 billion last year. Becoming India's top web retailer would be a vindication for Amazon. In China, the only other market with more than a billion people, the company has little to show after a dozen years, thanks to the dominance of Alibaba Group Holding Ltd. and other local web retailers.
"The biggest opportunity and the biggest challenges are both in India," said Agarwal, chief of Amazon India. "It's going to be a great Diwali."
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