According to a study by Indian Brand Equity Foundation (IBEF), India’s retail market is expected to touch a whopping Rs.47 trillion (US$ 782.23 billion) by 2016–17, expanding at a compounded annual growth rate (CAGR) of 15%.
The 2 images below taken from the study indicate 2 crucial findings:
- In the year 2012, food and grocery accounted for about 60% of total revenues in the retail sector.
- Hypermarkets are likely to be the largest retail segment. It accounted for 21% of total retail space by 2013–14.
The above figures don’t speak about organized retail. That information is available here where it says that organised retail accounts for around 5% of the total market share.
In other words, 95% of all the retail purchases Indians make are from small shops, and at least 60% of that ought to be food and groceries bought from the kirana stores.
Enters Amazon. A few days back Amazon announced a pilot project in Bangalore for what it calls in-store pick up for the products from selected kirana stores that are ordered from its website.
That means if you order items on Amazon website availing all the great discounts, you can pick them up from the local kirana store. Or perhaps the kirana store will deliver them to your doorstep with no delay.
At the moment this service is only for products that are ‘Fulfilled by Amazon’ (or FBA… explained later in this article).
Clearly Amazon is trying to cut down on the delivery time. Its full-page ads in major newspapers claim it will deliver any item within 1 day ordered from its website. Compare that with 4 days it took (April 19-24) to get a Cosco Toning Tube I ordered on SnapDeal.
Amazon understands how critical it is to deliver items fast. In US it wants to start its own private delivery network to reduce the shipping costs that rose 29% last year. And on December 1 last year CEO Jeff Bezos announced it would start octocopter or drone service in the US in 4-5 years subject to approval from the FAA (Federal Aviation Administration). The plan is to deliver items at the doorstep within 30 minutes of ordering.
In India amazon has started yet another pilot project with India Post for the cash-on-delivery model. The main factor here is that India Post has more than 150,000 post offices in India, out of which 89% are in rural areas. It is not difficult to imagine that if the partnership works it would give Amazon a tremendous boost in penetrating India’s huge unorganized retail sector on a scale no one can imagine today.
Thus even as Wal-Mart waits on the wings to enter India’s retail sector, Amazon is aggressively pushing its advantage in India. It makes sense for Amazon because after all Indian retailers are not its competition.
Its main fight is with Wal-Mart keeping in view the forecast that the world’s biggest e-commerce battle would boil down to vegetables what with 11% compounded annual growth in online buying.
Meanwhile, for small businesses in India a great opportunity awaits for tapping with Fulfilment by Amazon (FBA). Simply store the inventory at Amazon’s warehouse, and in turn let Amazon pack and ship your products to the customers.
There is a lot that’s happening in India’s retail scene. Amazon’s forays are indications of that.
[Picture of Amazon Fresh truck at the top is courtesy Jason Brackins in Flickr]