Mihir Dalal, MINT
Bengaluru, 9 May 2015
Online marketplace Amazon India has launched a service that will allow its third-party merchants to sell ethnic apparel, shoes, yoga books and other products to customers in the US and UK, as it looks to differentiate itself from rivals by tapping its large international presence.
Some 200 sellers have already started using the service called Amazon Global Selling and the company is fast expanding this service to more sellers, said Amit Deshpande, director of Amazon Seller Services Pvt. Ltd.
Because India doesn’t allow foreign direct investment in online retail, Amazon works as a marketplace, connecting customers with third-party sellers on its platform. The company has roughly 25,000 sellers currently and is adding a few thousand sellers every month.
“The intention is to expand this (global shipping for Indian sellers) to other markets. We did a pilot first and we found that this was very attractive for sellers, manufacturers and entrepreneurs. There are areas where there’s friction for sellers such as logistics, product compliance and tax because regulation is different in different countries. We are developing a network of third parties to provide these services to sellers,” Deshpande said.
Since its launch in June 2013, Amazon India has established itself as the biggest threat to local rivals Flipkart and Snapdeal. Until now, Indian companies haven’t ventured abroad, primarily because the size of the Indian market is large. E-commerce sales may exceed $50 billion (around Rs.3.2 trillion today) by 2020 from $4.47 billion last year, financial services firm UBS said in an April report.
Currently it’s unclear if international sales will become a large business for Amazon India. Paytm, another marketplace, is also exploring ways of cross-selling with China’s Alibaba, one of whose affiliates bought a minority stake in Paytm earlier this year.
“This service will help Amazon differentiate itself from local rivals because it offers sellers access to a much larger customer base,” said Devangshu Dutta, chief executive at consulting firm Third Eyesight. “Another advantage is that when you’re selling internationally there’s no margin pressure, compared with selling in India, where competition is intense. Sellers have pricing power and flexibility, and this obviously increases profitability. For Amazon, it’ll depend on whether they can scale this business up to a meaningful level.”
US-based Amazon, the world’s largest online retailer, already offers the global selling service to sellers in its international markets. Such cross-border selling accounts for about a fifth of its overall third-party sales.
Amazon India executives are working with their counterparts in the US and UK to make product recommendations to sellers and help them improve product visibility on the Amazon site. Apart from connecting merchants with third-party logistics providers, Amazon logistics services will also be available for sellers, said Deshpande.
“We think this is a huge opportunity. There are 25 million Indians outside India. And then there are other customers who want to buy stuff from India. Some of the early categories that we’ve identified are apparel, shoes, jewellery, health and beauty products, home furnishing and cricket bats, but the goal is to expand it to the full category set,” he said.
(Published in MINT.)