Amazon, the US-based online retailer, is one of a string of US companies—including tech start-ups and giants like Google—getting involved in India of late. Amazon has announced that it will be opening a new Fulfillment Center, its specialized version of a warehouse, in Hyderabad, India. The 28,000 square foot center will be the company’s largest warehouse in India, and its biggest investment in India to date. Amazon has greatly expanded its operations in India since entering the country in 2013. The new warehouse will be one of 11 Fulfillment Centers it has so far across India, spread throughout nine states.
Having a robust physical infrastructure is important, but Amazon has also engineered innovative solutions to penetrate the Indian e-commerce market. They have recently set up a subsidiary logistics company, Amazon Transportation Services Private Limited (ATSL), in New Delhi. It will aid Amazon India’s EasyShip model that cuts delivery times by bypassing distribution centers altogether. Launched last year, the service gives sellers the capability to directly ship products to the doorsteps of customers. The EasyShip model made Amazon the first online retailer in India to offer one and two day guaranteed-delivery services. The new logistics company will bolster this “last mile delivery” service, which many companies are betting on as the key to tapping into the growth of India’s e-commerce market. Because of EasyShip’s success, Amazon has plans to employ the model in the US, the UK, and China.
The creation of ATSL serves two important purposes: first, to compete with third-party delivery services in India by keeping logistics within the company, and second, to keep pace with large domestic rivals, like Snapdeal and Flipkart, who also possess logistics services wings. Both companies have been pursuing aggressive strategies to increase their market share. In a global investment push, Flipkart recently raised over $600 million. Likewise, Snapdeal has expanded its e-commerce services to offer online financial services and loans.
The Indian e-commerce market, already a $6 billion industry in 2012, is expected to reach $43 billion in 2018 and $76 billion by 2021. EasyShip has allowed Amazon to scale up its operations in India, and has already accounted for more than 60% of total shipments. The company’s sales in India are expected to exceed $2 billion in fiscal year 2015.
Chad Westra is a Research Intern at the East-West Center in Washington and an undergraduate student at Calvin College.