After having fallen flat in its efforts to challenge Alibaba (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report and JD.com's Chinese e-commerce leadership, Amazon (AMZN) - Get Amazon.com, Inc. Reportis pulling out all the stops to become a major player in India's still-young e-commerce market. Today's launch of an Indian version of Amazon Prime represents yet another step, and one that could represent an important way to stand out in a country where quickly and reliably delivering goods across long distances can be a challenge.
The e-commerce giant is promising unlimited one-day and two-day delivery for select goods in over 100 Indian cities, along with discounted same-day, morning and scheduled delivery in Delhi, Mumbai, Bangalore and Hyderabad and 30-minute early access to Lightning Deals. A version of Prime Video featuring both Indian and global content will be provided later.
Amazon is offering customers in the world's second-most-populous country a 60-day free trial, after which they'll be charged an introductory annual fee of just 499 rupees ($7.41). Eventually, the fee will rise to 999 rupees ($14.84), which is still 85% less than what Amazon charges U.S. Prime subs. India's relatively low per capita GDP of $1,617 (per the IMF) needs to be taken into account here.
Due to retail foreign investment rules, Amazon doesn't sell its own goods in India. However, with the help of its fulfillment center investments and logistics expertise, the company is now doing brisk business selling goods for third-party merchants. Amazon committed $2 billion to India in 2014, and another $3 billion this June. While some of the funds will go towards software R&D and building an Indian Amazon Web Services footprint, a lot of them will be directed towards adding to the 20-plus fulfillment centers Amazon has built in the country, and make a service such as Prime possible in spite of a transportation infrastructure that can be shaky in many places.
The company does face a couple of entrenched local rivals. Flipkart, which both sells its own goods and those of third parties, raised $550 million at a $15 billion valuation last year, and launched a Prime-like service called Flipkart First in 2014 -- it costs 500 rupees per year, and provides unlimited one-day and discounted same-day delivery. Snapdeal, owner of a major Indian online marketplace, was valued at $6.5 billion in a recent funding round, and is backed by Alibaba and eBay.
However, with India's e-commerce penetration rates still well below China's and the market growing rapidly -- Morgan Stanley (MS) - Get Morgan Stanley (MS) Report has estimated Indian e-commerce sales will grow to $119 billion in 2020 from just $16 billion in 2015 -- market shares could look very different in a few years. And Amazon is clearly willing to spend whatever it takes to be a leading, if not dominant, player.