Back in May, India implemented one of the strictest lockdowns in the world to contain the spread of COVID-19. And the government's order to shut down nearly everything except what it deemed essential services threw the country's e-commerce mechanism out of gear. The lockdown severely hurt Amazon's (NASDAQ:AMZN) business in India, for example, as warehouses had to be shut and deliveries had to be suspended to fall in line with government regulations.
But now it looks like the American giant is all set to take advantage of an accelerated shift toward online shopping caused by the lockdown. Let's see how.
E-commerce sales are back with a bang in India
According to data from e-commerce technology provider Unicommerce, online order volumes in India are now at almost 90% of pre-lockdown levels. A senior executive at an Indian e-commerce firm pointed out that order volumes in India fluctuated between 79% and 88% in the weeks following the restrictions on deliveries of non-essential items were eased at the beginning of May.
The recovery in gross merchandise value (GMV) has been slower, according to the unnamed executive, but there seems to be a consensus among industry players that online sales are recovering at a faster pace than offline retail. Snapdeal, a well-known Indian e-commerce player, states that the limited availability of merchandise at offline retailers on account of the disrupted supply chain is pushing people toward online retail.
Additionally, novel coronavirus infections in India continue to increase since the lockdown. This may be another reason why consumers are preferring online retailers instead of going to physical stores. Data analytics firm GlobalData estimates that e-commerce payments in India could jump nearly 26% in 2020. For comparison, the firm forecasts a 19.6% compound annual growth rate (CAGR) for India's e-commerce market from 2019 through 2023.
This indicates that the novel coronavirus-induced lockdown is expected to give India's e-commerce market a nice shot in the arm. For Amazon, this could be a big opportunity, as it has an extensive delivery network in the country and is pushing the envelope by entering new verticals.
Better times ahead for Amazon in India
Amazon has been constantly boosting its delivery infrastructure in India to reach more consumers. The e-commerce giant recently announced that it had expanded its Flex delivery program to 35 cities. Amazon initiated this program a year ago with three cities, allowing individuals looking for part-time jobs to deliver packages.
Amazon claims that it has recruited thousands of individuals under this program, bolstering its last-mile delivery infrastructure. This should help Amazon make a bigger dent in lucrative verticals such as grocery, where the company recently made a big push by expanding its Pantry service to over 200 cities, guaranteeing two-day deliveries.
What's more, Amazon has reportedly been given the go-ahead to deliver alcohol in the east Indian state of West Bengal. This could be Amazon's entry into another lucrative market -- West Bengal is home to 90 million residents, and there's a possibility that other Indian states could go the same way, as they have also been exploring the idea of online liquor delivery. India's liquor market is estimated at $27.2 billion, according to IWSR Drinks Market Analysis, and online sales of the same could add substantially to Amazon's addressable market.
Meanwhile, rumors suggest that Amazon is looking at ways to get more consumers into its ecosystem by picking up a stake in Indian telecom giant Airtel. This investment is expected to give Amazon a 5% stake in Airtel and a chance to partner with a telecom company that has close to 300 million subscribers.
As such, don't be surprised to see Amazon make a bigger dent in India's consumer discretionary market thanks to its extensive delivery network and its foray into new verticals.