Posted by Manish Bahl on February 27, 2012
In early February 2011, Amazon launched Junglee.Com as a marketplace in India. In 1998, Amazon had acquired Junglee (which means "wild" in English), an online virtual database-making company, and after 13 years now it has shown its affection to the "Junglee" domain name. The reason is that Amazon can’t sell directly in India due to FDI laws that restrict foreign companies on multibrand retail in the country. Nevertheless, the Indian law does allow foreign players to operate as an online marketplace to connect sellers and buyers with each other. Amazon is following this approach by partnering with both online (Snapdeal, Univercell, etc.) and offline (HomeShop18, Bombay Store, etc.) players in the country before it makes a full-fledged entry through an "Amazon.in"-type domain. Also, Amazon just received the Indian Government’s FDI approval to set up a logistics operation. The company plans to invest INR 15 crore (around US$ 3.06 million) to set up a wholly owned subsidiary to undertake the business of online marketplace operator and retailer inter-alia courier services.
Let’s look at what Amazon’s entry through Junglee.com means for online buyers, suppliers, and competitors:
Sellers: More Business And Some Risk
For suppliers, especially small size, it is an opportunity to drive sales through Junglee.com and win customer loyalty. If Amazon can redirect all its India traffic from Amazon.com to Junglee, there will be a significant movement on Junglee that will generate substantial sales opportunities. Over the period, Junglee will start providing ratings and reviews on suppliers, which means that players with quality products, timely delivery, friendliness, and good after-service will reap more benefits than who fail to do so. Once Junglee gets popular and starts driving more traffic, it will decide on which seller to appear as default for buyers. Thus, suppliers should be ready to work per asked conditions once Junglee has built its space in the market.
Competitors: Don’t Get Distracted; Stay Focused On Customers
Through Junglee, Amazon is preparing itself for future competition, especially from domestic players such as Flipkart.com and Infibeam, among others. Once the FDI issue is resolved (sooner or later it will be), Amazon will make a full-fledged entry with multibrand retail products. Existing players shouldn’t get distracted with the Amazon/Junglee combination and should focus on:
- Energies on what they do best – selling.
- Retaining current customers as a solid base of repeat buyers, which will deliver long-term benefits.
- Expanding the delivery network and improving their existing technology platform as providing fast, simple, but effective online information to consumers will be the key.
- Securing funding for future expansion and looking for strategic acquisitions (like Flipkart acquiring Letsbuy.com is the right move) to broaden their customer and product base along with improving the user interface.
Buyers: All Party At No Cost
Increasing competition and a bid to win more customers have put Indian consumers in a favorable spot. Every player in the market will be coming up with new and innovative products and approaches to lure buyers, who will have the option of cherry-picking the coolest, cheapest, and best product. Once the multibrand retail FDI issue is addressed in India, we will see increased competition in the market, which means online buyers will gain the maximum from both a quality and a price perspective.
Conclusion: The Race Is Just Started, But Players Will Have To Innovate Faster
There is no definite leader in the Indian eCommerce market, as the race has just started. Forrester estimates that there are 65 to 70 million people accessing the Internet regularly in the country, and with more population starting to use the Internet and with the usage of smart phones, debit, and credit cards rising so quickly, there are tremendous opportunities in the market. This is the period of learning: While Amazon is learning Indian consumer behavior, logistic issues, and ways to improve its system in India, homegrown players are learning in great deal about customer focus. I expect a number of eCommerce startups to emerge in India, but companies that invest in "innovation," both from a business as well as from a technology perspective, will gain the maximum, as the next five to seven years will be an exciting period for the Indian online retail industry.
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