February 08, 2012
US online retail giant Amazon has made its first foray into India with launch of a shopping website, Junglee.com, as it tests the waters for a possible full entry into the nation's e-commerce market.
India's e-commerce business is set to boom as incomes and consumer demand climb in a country of 1.2 billion people with a steadily ballooning middle class, analysts say.
Amazon's move, announced late last week, "is to get an insight into the Indian market," Asheesh Raina, a principal research analyst at global consultancy Gartner, told AFP.
"This market could be a game-changer for Amazon -- these e-commerce retailers survive on volume. India with its large number of people could be a huge opportunity," he said.
Junglee, which means "wild" in Hindi, is a modified version of the world's top online retailer's shopping portal, allowing customers to search for different products and compare prices.
It will offer over 12 million products from more than 14,000 Indian and global brands -- but buyers must make their purchases through a network of third-party suppliers either by ordering online or visiting them in person.
The set-up allows Amazon's Indian website to sidestep government rules forbidding foreign multi-brand retailers from operating in India as it only directs shoppers to sites rather than selling the products directly.
"It's a clever way of getting into the Indian market that works with the rules," Saloni Nangia, president of Indian research consultancy Technopak, told AFP.
The government announced last month it would allow foreign multi-brand retailers such as supermarkets into India but then did a U-turn over fears the move would hit small family-run stores that dominate the retail landscape.
Analysts say they believe the government still wants to ease regulations to let in multi-brand players but cannot say when it will happen.
Amazon, which has operations in neighbouring China, is aiming to give customers "a single online starting point", Amazon.com vice president Amit Agarwal said last Thursday.
"They can shop a wide selection of products sold by local and global retailers and make informed purchasing decisions," Agarwal said.
The company did not reply to repeated requests by AFP for comment on its next step in India.
Gartner's Raina said the move was a "low-cost way for Amazon to find out what the Indian market is about --- build brand loyalty -- and hopefully when the retail regulations loosen in India take their customers with them".
The launch of Junglee comes after Amazon said last month it was setting up its first warehouses, known in its corporate parlance as "fulfilment centres", in India. The warehouses allow Amazon to store products and ship them swiftly.
Some of Amazon's biggest competition in India will come from e-commerce portal Flipkart.com, set up in 2007 by two ex-Amazon employees and based in the southern city of Bangalore, that sells a range of goods from books to television sets, analysts say.
As an Indian company Flipkart is exempt from the restrictions that prevent Amazon launching a full-service site.
It is targeting at least $100 million in sales for the current financial year and $1 billion by 2015, up from only $11 million last year as India's e-commerce market grows exponentially.
Internet penetration is still low in India, which has around 52 million active Internet users -- those who go online at least one a month, according to the Internet and Mobile Association of India.
But that figure is expected to grow rapidly, helping e-commerce to take off.
"This is just the beginning of the market with the number of smart phones, debit and credit cards rising so quickly," Technopak's Nangia said.
Technopak forecasts the e-commerce market, which includes travel and financial services, will grow to $200 billion by 2020 from $10 billion in 2011.
"Many Indian young people have no history of only going to retail stores -- of only consuming in a certain way -- making prospects for e-commerce even bigger."
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