On the Shoulders of Giants: The Growth of Amazon in India

It seems that a study of publishing is not complete without an in-depth examination of Amazon and the changes that it has wrought in the industry. This essay will briefly explore Amazon’s beginnings and the business mantra that has driven its expansion over the past twenty years. Amazon has historically been a very growth-oriented company, and this focus is apparent in its business practices and expansion. The essay will follow Amazon’s outward expansion to Europe and East Asia, and discuss the specification of the company’s services in each of these locations. It will then explore Amazon’s foray into India. It will outline the problems and successes Amazon has faced in the Indian market, and the response it has entailed from native competitors (both web-based and not) in this market. I suggest that the Indian book market has particular characteristics that have made it difficult for Amazon to grow in India with the same kind of efficiency it has in other places.

The Advent of Amazon

The story of Amazon’s beginnings has been well documented in digital and print media, with numerous articles and books on the e-commerce giant and its infamous CEO Jeffrey Bezos. While this is common knowledge to most, it is important to mention that Amazon started out as a bookstore. Bezos wanted Amazon to be the “biggest bookstore on earth,” and in fact took a course by the American Booksellers Association on ‘how to start a bookstore’ (Brandt 70; 1). In 1994, Amazon.com was established, and on July 16, 1995, it was live and open for business (Brandt 81).

Over the next few years, Amazon grew immensely as a result of their intelligent business strategies. The primary reason for Amazon’s unprecedented success is their loss-leader pricing strategy. More often than not, the Amazon price of a book will be slightly lower than the price at your local bookstore. Amazon has long since mastered the art of cinching deals with publishers to get the maximum discount for books, so that they may sell it for ‘cheap.’ Despite the agency-pricing model that allows publishers to set book prices, Amazon still has control over discounts (such was the contract Simon and Schuster signed with Amazon). Publishers have increasingly become more compliant with Amazon, because they know that it is in their best interests to let Amazon have its way with prices and contracts. UK editor Philip Jones admitted, “The worst thing that could happen [to book publishers] would be for Amazon to go away” (Oliver). George Packer notes:

“In its drive for profitability, Amazon did not raise retail prices; it simply squeezed its suppliers harder, much as Walmart had done with manufacturers. Amazon demanded ever-larger co-op fees and better shipping terms; publishers knew that they would stop being favored by the site’s recommendation algorithms if they didn’t comply. Eventually, they all did.”

The power and influence that Amazon wields over publishers is enormous, so much so that Amazon has been termed “Literary Enemy Number One.” Amazon has found it easier to negotiate deals with publishers both inside and outside North America based on its immense reach and the recognition that its name carries.

Indeed, Amazon has been conscious of the way it is perceived in society because this perception itself is a source of power. It is no surprise that growth is one of Bezos’ central concerns. In Amazon’s early years, Bezos went so far as to under-report the number of books in Amazon’s inventory (1.1 million instead of 1.5 million) so that they could report an increase in later years (Brandt 70). This strategy shows how eager Amazon is not just to grow, but also to produce an image of itself as growing at an exponential rate. According to TechCrunch, Amazon’s book inventory alone comprised 3.4 million titles in 2014, a number that would grow at the rate of one title every five minutes. Based on those calculations, that puts their 2016 inventory at around 3.6 million titles. It is very plausible that this number is largely understated, but Amazon’s data is a well-guarded secret, so it remains unconfirmed. Number of book titles aside, Amazon’s online presence has grown outside of the USA’s borders.

Robert Spector claims that the mantra at Amazon in 1996 was “get big fast” (97). In 1998, Amazon opened its online stores for the UK and Germany, on the domains amazon.co.uk and amazon.co.de respectively. According to Spector, Bertelsmann (owners of Penguin Random House) were keen on partnering with Bezos to help with Amazon’s European takeover. They ended up investing in Barnes & Noble’s online site instead. In 2000, amazon.co.fr and amazon.co.jp were set up for French and Japanese markets. Bezos made sure to adjust Amazon’s business model in each of these locations, so as to ensure maximum customer satisfaction. For example, their operations in Germany ran 24/7, a practice frowned upon for German brick and mortar stores (Spector 188). Similarly skirting the laws in France, Amazon decided to offer shipping at one cent as a response to the government’s ban on free shipping. In both France and Japan, Amazon had to ensure that their warehouse stocked French and Japanese books, so as to cater to the non-English speaking market. Such issues were simply not a concern for Amazon’s previous operations in the USA or UK, but also display the need it felt to adapt itself in each market in order to assert dominance.

Meanwhile in India

While Bezos was off conquering most of Europe, much to the joy of competitors, he left the Indian market untouched. In 2012, Frankfurter Buchmesse valued India’s book market at $2 billion (USD). According to Euromonitor, the e-commerce market has grown by 140% in 2015, with sales of Rs.1.3 trillion (over $19.5 billion USD). Unfortunately, more recent statistics tracing the sales of print and e-books on e-commerce websites are not available. A 2013 report concludes that the Indian book market is comprised of 40% academic texts, 30% children’s books, and 30% trade books (Mallya). Academic books also dominate the e-book landscape in India, with STM books comprising 84% of all e-book sales (Mallya). According to a recent Statista report, Indians spend the most amount of time reading – approximately 10 hours per week. The German Book office places India’s literacy rate at 74%, which includes non-English languages (although the Government of India reports a lower rate of 64.8%). It is evident that India holds much promise for booksellers, both traditional and otherwise.

Amazon’s foray into the Indian market was rather late – amazon.in was set up in 2012. By this time, two former Amazon.com employees Sachin Bansal and Binny Bansal had set up a local e-commerce website called Flipkart in 2007. Unsurprisingly, Flipkart started out as an online bookstore, and soon expanded into other categories (see here for a history of Flipkart’s growth). It now holds a 52% retail value share in the Indian e-commerce market, and has been named “E-commerce company of the year” over Amazon India, and other local competitor, Snapdeal (Euromonitor). It is safe to presume that Flipkart is Amazon’s direct competitor in India.

The Indian market is unlike the other markets that Amazon has gone into. As an example, Cash on Delivery (COD) is the preferred method of payment in India, and all major online retailers in India offer this service. More importantly, the primary means of differentiation between the Indian market and other markets is the sheer variety of languages prevalent in India. India has 22 scheduled languages apart from English. In fact, 41% of the population reports Hindi as their primary language (Government of India).

The immense number of languages in India is a key hurdle for prospective online retailers. Indeed it is difficult, particularly for smaller companies with overhead costs, to form a team and intelligently curate books across such a wide variety of languages. Moreover, it is difficult for such small companies to stock appropriate quantities of books in their warehouses. Given that the markets for each individual language are often very small and specific, it may not even be worthwhile for such small stores to stock books across a wide variety of languages. This is particularly true because a majority of the books in these markets circulate through small-presses, and local brick and mortar stores in the particular states where the language is prime. Rather, mid-sized online stores may be better suited to sticking to one language, such as English, and developing a detailed inventory in this language.

However, the conundrum of the Indian market is still not this simple. According to Forbes, “[t]he statistics on English speaking ability tends to be unreliable for a host of political reasons, but it is generally accepted that somewhere in the range of 30% are able, to varying degrees, speak English—though only a third have some semblance of reading and writing aptitude.” This fact presents certain problems to book e-tailers in India. Though the Indian market is indeed massive, it is divided into exceedingly disconnected segments in terms of language. And within this mass collection of languages, there is very little transference of languages, which means that most people will only be fluent in one language and thus will not be able to buy books in other languages. In the case of English, this means that only 30% of the entire Indian population can be prospective buyers for books in the language.

Even for these books, we find that the online market is inherently marginalized. This is for two reasons. Firstly, though 30% of the population can speak English in some form, as the Forbes quote above shows, only about 10% of the total population can read English. This means that the effective market for English-only bookstores is immensely small relative to the whole population. Secondly, it also means that should booksellers attempt to stock books in languages other than English, they may also need to make their websites accessible in these languages. The necessity of including such different languages within an Indian online marketing platform compounds the problems of establishing a diverse and successful online book trade in India. Flipkart, for example, does not offer access in any language other than English, and the same is true for Amazon. These statistics raise important questions for the developmental strategies of online retailers in India.

In contrast to Flipkart, Amazon’s already exponential growth has allowed it to sufficiently penetrate the Indian market. Indeed, Amazon’s position as an immense power in the global electronic marketplace means that it is capable of taking away the majority of customers in the small and very selective market actually available to online retailers in India. Their cost-cutting techniques allow them to undercut all of the competitors in the marketplace including Flipkart. In general, the price of a book is almost always lower on Amazon.in when compared to other stores. Such strategic play on Amazon’s part has brought consequences for other retailers such as Flipkart, who cannot mark down their prices to the same degree. Moreover, given Amazon’s global size and reach, it can afford to be more accommodating to complaints received from customers, such as those pertaining to the replacement of a book. It can also afford to feature in its stock a large selection of non-English books, as has recently been the case with Telugu-language books. Given the enormous technological capital Amazon wields, Flipkart’s market value has been decreasing. As of July 2016, Amazon successfully took the lion’s share of the marketplace as it surpassed Flipkart’s sales for the first time since its arrival in India.

However, one cannot write off Amazon’s Indian competitors so easily. Even though Flipkart’s market value has been fluctuating and often decreasing since Amazon’s arrival, the company is still valued at $9 billion after 4 years of Amazon in India. The persistence of the Flipkart brand poses important questions for Amazon. One wonders why despite Amazon’s lower prices, more accommodating customer support, and heavy financing, Flipkart has continued to survive as one of the major players in the Indian market. Though little research has been conducted into this question, it is plausible that Flipkart’s continued patronage stems from a loyal customer base. If Amazon is to monopolize the online book market in India, it must first attempt to ascertain the nature of this loyalty. For example, this loyalty to Flipkart may stem from a perception of the company as being “more Indian” than Amazon. While Flipkart is an Indian and India-based company, Amazon is an extension of a large Seattle-based global chain, and this fact may deter consumers who value the “localness” of their goods and health of the economy.

It seems then that the way each company markets itself to consumers may be integral to deciding their success or failure in the future. If Flipkart begins a campaign to assert its true Indian-ness relative to Amazon, then it may realistically see a larger share in the market. However, a similar truth holds for Amazon. If the global giant can successfully entrench itself into Indian society and culture, and make itself seem authentically Indian, it may be able to further reduce the value of its competitors in the Indian market. The possible domination of the Indian market by Amazon in the near future may thus be brought about by a combination of its global strengths (better service, larger inventory, lower prices) and perceived local authenticity.

Some (rather tangential) notes:

  • While writing this paper, I was disappointed to find very little research (by which I mean statistical data) on the publishing industry in India. Neilsen Book Scan reports were not open to the public, and did not include Amazon’s operations (which may make their data slightly irrelevant). Some of the statistics quoted in this paper come from Euromonitor, which I accessed via McGill University’s proxy, so I apologize if everyone cannot login to view this information. All this calls for open-access!
  • The two print books that I used for this paper are accessible at SFU’s library.
  • There was an interesting comment in Mallya’s report regarding the numerous e-readers and tablets available in the Indian market – which is strikingly different from the North American market dominated by iPads and Kindles. The impression I received was that Indians are more inclined to buy a multi-purpose device as opposed to a dedicated e-reader, which makes me wonder whether sales of digital formats will take off in India with the same success as in Europe and North America.
  • I found a rather detailed article in Fortune Magazine that takes the reader inside Amazon’s operations in India – it is slightly long, but an easy read for those interested.
  • I would have liked to look into Foreign Direct Investment (FDI) laws that apply to companies like Amazon, but unfortunately, the economics behind them is beyond my understanding.

Works Cited

ANI. “Flipkart Is the ‘E-commerce Company of the Year” Business Standard. Business Standard, 02 Sept. 2016. Web. 12 Oct. 2016.

Aula, Sahit. “The Problem With The English Language In India.” Forbes. Forbes Magazine, 6 Nov. 2014. Web. 12 Oct. 2016.

Biggs, John. “There Is One New Book On Amazon Every Five Minutes.” TechCrunch. 21 Aug. 2014. Web. 12 Oct. 2016.

Brandt, Richard L. One Click: Jeff Bezos and the Rise of Amazon.com. New York: Portfolio/Penguin, 2011. Print.

“Digital Consumer – Connected Commerce: India.” Euromonitor International. N.p., 3 May 2016. Web. 12 Oct. 2016.

“Flipkart: About Us.” Flipkart.com. Web. 12 Oct. 2016.

“Flipkart Online Services Pvt Ltd in Retailing (India).” Euromonitor International. 18 Jan. 2016. Web. 12 Oct. 2016.

“Flipkart Valuation Downgraded by Morgan Stanley 3rd Time in 6 Months.” Live Mint. N.p., 27 Aug. 2016. Web. 12 Oct. 2016.

Frankfurter Buchmesse. “Perspectives on Publishing in India 2014-2015.” (2014): 1-15. Web. 12 Oct. 2016.

Gessen, Keith. “How Did Amazon End Up as Literary Enemy No. 1?” The Hive. N.p., 06 Dec. 2014. Web. 12 Oct. 2016.

Griswold, Alison. “France Banned Free Shipping. So Amazon Made It Cost One Cent.” Slate Magazine. N.p., 11 July 2014. Web. 12 Oct. 2016.

“Internet Retailing in India.” Euromonitor International. N.p., 18 Jan. 2016. Web. 12 Oct. 2016.

“Literacy And Level of Education.” Census of India. Government of India: Ministry of Home Affairs, 2011. Web. 12 Oct. 2016.

Mallya, Vinutha. “India.” Global EBook: A Report on Market Trends and Developments (2014): 72-82. Web.

Milliot, Jim. “S&S to Go Agency With Amazon.” PublishersWeekly.com. N.p., 20 Oct. 2014. Web. 12 Oct. 2016.

Oliver, Sam. “Amazon Said to Be ‘Increasingly Ruthless’ in Negotiations with UK Publishers.” Apple Insider. N.p., 27 June 2014. Web. 12 Oct. 2016.

Packer, George. “Cheap Words.” The New Yorker. 24 Feb. 2014. Web. 12 Oct. 2016.

Pilla, Viswanath. “Amazon India Launches Online Telugu Book Store with over 10,000 Titles.” Live Mint. 29 Aug. 2016. Web. 12 Oct. 2016.

“Scheduled Languages in Descending Order of Speaker’s Strength.” Census of India. Government of India: Ministry of Home Affairs, 2011. Web. 12 Oct. 2016.

Spector, Robert. Amazon.com: Get Big Fast. New York: HarperBusiness, 2002. Print.

“Which Countries the Read the Most.” (2016) Statista. Web. 12 Oct. 2016.

Verma, Shrutika. “Has Flipkart Lost No 1 Slot to Amazon?” Live Mint. N.p., 23 Aug. 2016. Web. 12 Oct. 2016.

2 Replies to “On the Shoulders of Giants: The Growth of Amazon in India”

  1. I was quite attracted at the first place by reading the title! The essay is mainly about Amazon’s business over the past 20 years in different countries with the specific focus on Indian market. It’s interesting to hear something in India, a special market with more than 20 languages, and very marketable as well.

    Overall, the essay is well structured into 2 parts. “The Advent of Amazon” part talks about how Amazon “get big fast” and “sell at cheap”. “Meanwhile in India” part, which I found even more interesting, deals with the issues Amazon has in Indian market and its local competitor—Flipkart.

    One of the major arguments the author put with solid support and evidence is about the language issue in India, which increases the difficulties to market in this country. Later, author explains 2 reasons “why Indian online market is marginalized”, one of which is “only 10% in total can only read English”—it is true that English-only books in India has limited market because of 10% English readers, however, I think it doesn’t effect online market only, but more on overall book market in India.

    Further thoughts on language issue, author mentions that book sellers need to think about language diversity on book marketing platform online. I don’t know how much it costs for put all 20 languages online or whether it is practical or realistic (Have any companies do this in India?), but I wonder whether it is necessary. For sure it will beneficial on marketing to do the customization, but Amazon has to think of trade-offs. For example, in Switzerland, there are 3 official languages (German, French and Italian), but on Amazon Switzerland there are only 2 languages available which are French and English, which I think is reasonable, since most people can read English there. But are there any Swiss who can only read German? Of course YES, but Amazon won’t do it because of the trade-offs for business. The same case in India, I don’t think Amazon would do it or any other competitors will.

    The comparison between Flipkart and Amazon is very interesting and valid. Flipkart seems to hold the early-mover-advantage, and more localized, but Amazon holds price lead advantage that kind of switch the customers, but Flipkart is still competing. I would love to hear more about the strength and weakness analysis between these two companies if there are.

    Both the beginning and ending are strong and valid.

    Interesting article, fun reading!

  2. It seems that Amazon is really pushing hard in india, with a very large number of stories coming out around June of this year about Amazon’s $3Bn investment. These stories point to a lot of stats about Amazon’s growth in India that would have been very relevant to discuss here.

    Adding Flipkart to the search yields stories that specifically discuss the relative positions of the two companies.

    However, even without making reference to these stories and to the statistics laid out in them, I found the essay did begin to address the challenges that Amazon’s competitors face, as well as the opportunities for those in the new markets. Perhaps if the essay could have started in the middle—on the discussion of Amazon India—there would have been more space to delve into the discussion further.

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