India's e-commerce market is a growth hotspot right now thanks to increasing internet penetration in a country of nearly 1.4 billion people. According to third-party estimates, the e-commerce market in India could clock a compound annual growth rate of over 18% through 2024.
Not surprisingly, competition in the space has intensified this year with the entry of new players such as Reliance Retail's JioMart. But American giant Amazon (AMZN +0.97%) isn't giving its rivals an inch in India as it goes all out to boost its share in this lucrative e-commerce market, which could be worth $99 billion by 2024 as per Goldman Sachs estimates. The Jeff Bezos-led company has decided to turn up the heat on its rivals in India during the upcoming festive season sales.
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Amazon's latest ploy to boost sales in India
Amazon recently said in a blog post that it has recruited more than 100,000 neighborhood stores, local shops, and mom-and-pop stores (known as kirana stores in India) to boost its sales during the coming festive season in the country. Of these, 20,000 retailers are a part of the Local Shops on Amazon platform that the company launched in April this year.
Only 5,000 offline retailers and local shops were a part of the program at launch, indicating that the company has done well to scale up its distribution network at an impressive pace to expand the program to 400 cities. Meanwhile, Amazon has included more than 15,000 local store owners in the Pay Smart Store program, which allows customers to buy products from stores by scanning their QR codes and pay using a variety of options.
And Amazon has enrolled more than 28,000 shops in its "I Have Space" delivery program. With this initiative, the e-commerce giant is partnering with local shops that act as last-mile delivery stations. Amazon estimates that these different programs will help it deliver a wide range of products during the upcoming sale season, from "daily essentials to large appliances and from home décor items to gifts and fresh flowers."
Amazon is also promising same/next day deliveries to customers who purchase items from stores that are a part of the Local Shops platform. All in all, the company has set itself up nicely for the festive sales season in India this year, which is expected to generate $7 billion in sales as per RedSeer Consulting -- a nice jump from the prior-year period's sales of $3.8 billion.
Nearly 160 million people are expected to shop online during this year's festive season, compared to 135 million last year. So it is important for Amazon to scale up its presence in India ahead of this lucrative sales season and replicate the success it saw during the Prime Day sale held in early August.
The two-day Prime Day sale in India saw the involvement of more than 91,000 small and medium businesses, which helped the company record more than $600 million in sales. The addition of more offline shops for the upcoming festive season could help it do even better this time.
A look at the bigger picture
Amazon's foray into local shops and retailers in India should pay off in the long run, as online retail accounts for only a small portion of the country's overall retail market. Goldman Sachs estimates that online retail will account for 11% of India's retail space in 2024, indicating that there is still a lot of room for growth, as the number of Internet users in India is expected to keep growing.
There are approximately 690 million Internet users in India at present, a number that's expected to jump to a billion in the next five years as per a third-party estimate. As a result, India's e-commerce market should enjoy secular growth -- and Amazon is pulling the right strings to take advantage of this multi-billion dollar opportunity.
