'Growth will come from driving more online adoption,' says Amazon India's top exec Manish Tiwary

After a decade of operations in India, Seattle-headquartered Amazon is setting its sights on the next 200 million users. With substantial capital investments and a commitment to digitising MSMEs and expanding the company’s omni-channel focus, Amazon’s profitability playbook for India is well on its way to success, says Manish Tiwary, Vice President and Country Manager of Amazon’s India Consumer Business. The 54-year-old reflects on the company’s journey over the past decade and shares its vision for its vision for the future in an exclusive interview with Business Today’s Binu Paul. Edited excerpts:

Q: How did Amazon manage to innovate for India and adapt strategies to meet the unique needs of the marketplace? 
A: We were fortunate that the stakeholders in Seattle gave us not only the permission, but also encouraged us to innovate for Indian customers and sellers. And therefore, what we created was ‘made for India and made in India’. We had the engineers and the ability to influence the marketplace, this stack and every aspect of the business. To take a few examples, 10 years ago, the mobile network quality [in India] wasn’t very good. We created a different app to solve the issue of latency. Very quickly, we moved into [local] languages. Right now, you can shop in seven [Indian] languages... A lot of people, back then, were not comfortable shopping online. So, we started a programme called Amazon Easy to establish a network of shopkeepers to help people shop online. More than 2 million customers came to Amazon via Easy. Before we came to India, we did not have ‘pay on delivery’... We wanted to quickly build trust with the customer [and so] pushed the fact that returns and refunds are very easy [when shopping online]. Now they sound commonsensical, but 10 years ago they sounded quite revolutionary.

On the seller front, a lot of them had never used a computer. For them, the first technology interface was the mobile. So, we had to create what was the first seller app on mobile. To familiarise sellers with cataloguing and other practices, we set up a seller university—a bank of videos on these topics. We also set up a system called Seller Provider Network where we would work with third-party agencies to train and help the sellers. We created Seller Flex, an exclusive fulfilment programme to keep track of sellers’ inventory. We had a small start, with around 100 sellers. We didn’t even have transportation logistics. Now, there are 1.2 million [sellers]. The one small warehouse has become close to 43 million cubic ft of storage space.

Amazon Pay, which was launched to close the gap for those people who don’t have credit or debit cards, is being used by 8.5 million local stores and small businesses, while Amazon Pay UPI is being used by more than 80 million customers.

Whether it was on the customer front, the seller front, or the logistics front, we had to innovate for India. And that goes to show that you have to think differently about India.

Q: Will emerging competition from major conglomerates disrupt the existing e-commerce duopoly (of Amazon and Walmart-backed Flipkart) in India?

A: I wouldn’t call it a duopoly. When you start something new, there will always be one or two players initially, others will observe for some time and then step in. There are so many players in India who are large, very effective, who innovate really well. The biggest industrial houses are in there—Tata, Reliance—and then there are the others like Flipkart, Nykaa. They are such impressive players. Monopoly or duopoly emerges when you hit a certain penetration, when there are one or two players controlling it. For e-commerce, it’s just the start. This is the stage where you will see innovation, you will see new entrants. It’s not capital. Capital is the easiest thing available in the market. It’s the strength of the idea and how you can innovate that would define the longevity of the company.

Q: With ONDC emerging as a disruptive force, what is Amazon’s perspective on the initiative?

A: ONDC is a neutral network; it can’t be competition to anyone. Right now it is doing a lot around restaurants where we are not active. If the ONDC piece works, it will help create better pipelines on all sides. But it is early days, I don’t see anything as competition right now. We have started working with them. There is a road map, and we are already doing some work on logistics and payments.

Q: Why did Amazon shut down its food delivery business in India? What is your interest in the online pharmacy vertical?

A: As a business, we believe that we need to look at new ways to fulfil customer needs in a sustainable manner. Amazon is a company of builders. Sometimes you say, ‘These things are working, let’s scale them’ or ‘These things are not working, let’s change or close [them]’ and then you start other experiments. Food delivery was an experiment; we stopped it last year. E-pharmacy is something we are interested in. We work closely with Apollo [Pharmacy]. The business is scaling up now.

Q: What has been Amazon’s progress in fulfilling its pledges in India?

A: In 2020, when Jeff [Bezos, Amazon Founder] visited [India], we made three pledges. One was digitisation; we said we would digitise 10 million small businesses by 2025. The second was employment; we said we would create 2 million incremental jobs directly or indirectly by 2025. And the third was to do $10 billion of exports. On digitisation, we are close to 4.1 million; on employment, we have reached 1.1 million. Even if you look at Amazon’s own employees, we are one of the largest private sector employers in this country with close to 110,000- 115,000 people. The progress in exports initially was so good that we doubled the plans to $20 billion. We’ve hit $5 billion.

Q: What is Amazon’s view on India’s market potential?

A: The fact is, despite all that we’ve done, e-commerce is still a very small part of retail. The penetration would be 2-3 per cent. In bigger categories, like fashion and grocery, it’s even smaller. If you look at the macro factors, India has one of the youngest populations [in the world, and] they are early adopters of digital technology. We are at a per capita of around $2,200. At a certain point, when the per capita income hits a [threshold], the consumption pattern starts skyrocketing... In the next two to three years, we will start hitting that level. Multiply it with the population and the age profile, [and] India would definitely be one of the most interesting and high-potential countries for Amazon.

Q: How has the Prime programme fuelled Amazon’s growth in India?

A: Prime plays a very, very significant part. These are our most engaged customers. It's a paid programme and when you pay for something, it means that you see more value for it than other programmes. This (the growth) reflects on each of our pillars— shopping and entertainment. On the shopping front, we take the best from the world and we also innovate for India. On video, there is worldwide content and very strong local content. What drives that growth is—how much of free shipping you get and at what speed, like if you can get 30 per cent of your orders on the same day without having to pay anything extra, that’s a big thing. Prime one-day delivery is available on millions of items. On entertainment, you get access to some of the best content. Entertainment is not only OTT, it also includes Music, Kindle, and various other programmes. In 2022, over 70 per cent of new Prime members shopped from smaller towns like Anantnag (Jammu & Kashmir), Bokaro (Jharkhand), and Tawang (Arunachal Pradesh). We don't share absolute numbers (on Prime membership) at a country level. But, I would say that Prime in India has been one of the fastest-scaling Prime programmes in the world. We are really happy with the way the Prime programme is scaled up in the country.

Q: Do you see signs of India’s e-commerce market maturing? What about profitability?

A: I don’t see India maturing as an e-commerce marketplace for the next couple of decades. But I would not confuse maturity with profitability. Maturity is when most of the innovations are in place, when growth slows... there is a lot of headroom for that. Amazon has a lot of experience in e-commerce and we have a playbook on how to drive sustainable growth. This concept, where at some point you grow without looking at profit and then just make profit, is not how we operate. It’s always customer backwards with the right balance.

Every business has a certain investment and payoff cycle. E-commerce is investment heavy at the beginning because you have to set up the network, make enough digital investments and at a certain point, it would be profitable. We’re pretty much on that journey.

India is a unique and diverse market. We’ve operated across many countries, and the people running Amazon in India have a great deal of expertise in the country. The best thing to do—which is what we’ve done in India—is to take the global learnings and dovetail them with the learnings from India.

There have been ups and downs but we are pretty much on our journey to achieving profitability as per the playbook. I can’t share the timelines, but I would say the playbook is in line with what we’ve done in other countries; there is a clear plan for profitability.

Q: How will Amazon get the next wave of users and drive the next phase of growth in India?

A: We have to earn the right to win the next 200 million customers. For customers, we have to innovate more. This innovation could be as simple as voice search, visual search, simplification and personalisation, etc. We have acquired a company called GlowRoad that is into social commerce, which will help us in this journey. For sellers, we have a programme called Smart Commerce, which is a suite of SaaS tools to help small stores digitally upload their inventory to a marketplace or create a storefront. If we are attractive enough, a lot of them will come on board Amazon. We need to innovate much harder. Customers are choosy and picky, and rightfully so... Therefore, our focus, as we get into the next decade, is on how to get the next 200 million customers and the 15-18 million inventory points in this country on to the platform. The next two decades of growth will come from driving more and more online adoption. Think about grocery or fashion, the penetration online is so low. There is a lot of growth the retail industry will see from omni-channel. So, a lot has to be done in the core part of the business.