[The Big Interview] Amit Agarwal on why he prefers a boring Amazon
Athira Nair
![[The Big Interview] Amit Agarwal on why he prefers a boring Amazon](https://images.yourstory.com/cs/wordpress/2016/06/Amit-Agarwal.jpg?mode=crop&crop=faces&ar=16%3A9&format=auto&w=1920&q=75)
Wednesday December 20, 2017 , 18 min Read
Amit Agarwal, Amazon's India Country Head and Global Senior Vice President, claims the company is the clear market leader in all the metrics that matter.
Amazon’s India Head, Amit Agarwal, is a difficult man to catch, considering he spends about 15 days a month at the company’s global headquarters in Seattle. When we did catch him, Amit spoke about all things Amazon. Yes, we did hear, yet again, about Amazon’s famous “three pillars” and its “flywheel”.
We also got other insights. Like how Amit uses Alexa as a tie-breaker in his arguments with his dad. On the numbers front, Amit claims Amazon is growing much faster than Flipkart, and is the market leader in terms of customer order share. He also spoke about the “millions and millions” of Prime members, grocery plans, and future investments in India. Edited excerpts:
![Amit Agarwal, Amazon India Country Head](https://images.yourstory.com/cs/wordpress/2016/06/Amit-Agarwal.jpg?fm=png&auto=format)
Q: What has really worked for Amazon this year?
Amit: Amazon has been in India for only four-and-a-half years. So, in a sense, Amazon is the youngest e-commerce player in India. The first year was about getting noticed, second about getting relevant, and third about getting the leadership on inputs, the things that we believe the customers care about.
Last year, we exited with a few promising trends. We evaluate the strength of our business with the quality of the customer experience we provide. And the three pillars we measure using data are selection in stock, price competitiveness, and fast delivery. Data and benchmarking shows how we are doing.
We exited last year with a leadership position in all three dimensions – we had almost 90 million products, next-day shipping network expanded to 200 cities, and we knew from data and surveys that we were the most price competitive for any category that customers shop in. We exited with the highest traffic.
In 2017, there were five emerging trends. First, the democratisation of choice. Customers are shopping more than just mobile phones online, they even shop vegetables online. Second, democratisation of buying and selling. Now online shopping is taking place in smaller cities. Third, convenience has the potential to become a habit. E-commerce only works when customer mindset moves from pricing to convenience. Else, it is not adding any value. With Prime, we are seeing early signs of that. Fourth, we want this to be more than just customer evolving. The whole ecosystem is evolving – we launched Udaan, Launchpad, IHaveSpace. Fifth, the potential for e-commerce in India is bigger; it can be global.
In the last 12 months, we continue to be the leader in the inputs I talked about. We have increased the selection to 160 million items. In last 12 months, we have expanded the selection more than in the three years before that. We have more sellers now.
With 160 million items, we have observed a very healthy customer behaviour. Last month, customers bought 16 million products in 30 days. That’s what online commerce should be; it’s not about the mobile phones and exclusives.
We have democratised access – almost 85 percent of our customers come from Tier-II and smaller cities, and more than 50 percent of sellers are from Tier-III cities. During Diwali – in 30 days – 99.7 percent of India (pincodes) placed an order on Amazon. I don’t know if any other 4.5-year-old brand in India has such ubiquity in awareness and usage. 80 percent of our sale is on the mobile.
Our delivery network has grown to remote locations like the Northeast, and Lakshadweep; we service army bases.
In making the convenience a habit part, in more than a year of Prime, we have millions of paid Indian members. This is the largest loyalty programme in the country. They are shopping on Amazon multiple times a week, streaming video multiple times a day, depositing balances on Amazon Pay, and ordering grocery from Amazon Now or Pantry, streaming music on Alexa, using Fire Stick. We are very excited about this loyal base building so rapidly.
More Prime members signed up in the first 12 months in India than any other geography in Amazon – even after we raised the prices. Their engagement is the highest in the world. More than 50 percent of Prime members are from outside the top 10 cities. During Diwali people from about 350 cities bought Prime membership.
To make convenience a habit – we launched Alexa, Prime, and Fire Stick, and scaled Amazon Pantry to 34 cities, using Amazon Pay to make payments convenient – all these happened this year. Making it a habit will take time. It is still new for India: Alexa is mass Artificial Intelligence (AI), especially in a country where people like to talk.
The other day, my father was visiting me. He just can’t get his head around the fact that he just says something to Alexa and it happens – whether he wanted to hear news, or call a cab, or listen to songs, know how much garam masala costs, know the age of Shashi Kapoor when he died, the height of Amitabh Bachchan versus Abhishek Bachchan.
These are the kinds of useless conversations we had. Whenever we had a debate, we had a tiebreaker (in the form of Alexa). The degree of conflict at our house has gone down. It’s interesting on a daily basis – when he wants to watch a serial, I told him about Fire Stick so he can watch it ad-free, and now he is like, “Why do I watch these ads?”
The ecosystem evolution part – customers can now pick up packages at 17,500 kiranas and small stores across 225 cities. I don't know if organised retail exists in these many cities. Udaan (Amazon’s assisted buying initiative) is in 21 states – so you can shop 160 million products by going to a local store. On the seller side, we have tie-ups with companies and governments to allow micro-entrepreneurs to sell on Amazon.
Finally, there is the Global Sellers programme. We are taking Make in India abroad–25,000 Indian sellers sell 75 million items on 10 marketplaces on Amazon to hundreds of millions of customers. This is growing 100 percent annually. This can become bigger than Indian e-commerce in five years.
From the perspective of these five dimensions, the last 12 months have been very exciting. We like to trust metric of organisations that put statistical methods behind it like App Annie and ComScore. Our traffic is 50-100 percent more than the next alternative. We crossed 100 million downloads, the highest for any e-commerce site, and we have over 150 million registered customers.
We commissioned an IMRB Survey, which covered 30,000 customer points in 200 cities – our customer share at 44 percent, and order share at 42 percent, are the highest in the e-commerce space right now. The next alternative is at least 4-6 percent slower.
According to data shared by other investors and ours, we are growing 150 percent faster than anybody else. We are exiting this year as the fastest growing marketplace, leader in all inputs that customers care about, highest customer share and order share, and the largest customer base for a loyalty programme.
If you had told me four years ago that we would get here in four-and-a-half years, I wouldn't have believed it. So, I am very excited. This is a long-term investment for us to transform how India buys and sells and how we can transform lives.
This is very early, not worth finetuning or hair-splitting over where this is. At the end of the day, this is immaterial. Where we need to get to is when hundreds of millions of customers can buy everything they need on us, every manufacturer in India selling globally through Amazon, tens of millions of customers using Prime and streaming music, video, books, content etc. This is barely Day One.
Q: What about overall sales?
Amit: You can decide what you want to pay attention to. We run a marathon, I can tell you my timing, but not how I jumped when I run the marathon. We don’t optimise our monthly funnel to sell something on a single day. I know what my sales are. I know what the data out there is. Based on the data we have, we are neck and neck in sales. Based on customer share and order share, we are far ahead. Based on traffic, we are multiple times ahead. We don’t track sales as there is an inherent flaw in that metric. You can buy sales through discounting. You can’t buy customer loyalty.
So, every month or quarter, sales can change based on the number of sale events you do. In December, they had some three sale events and we didn’t do any. You need to look at the 12 month period. When you are growing 150 percent faster, it is a matter of mathematics when it would be sustained leadership. So why quarrel about month 10 versus 11.
Q: So you are saying, for all practical purposes you are ahead of Flipkart?
Amit: In terms of growth rate, customer order share we know for a fact (that we are head). In terms of sales, based on all the noise out there, we are neck-to-neck but growing 150 percent faster.
Q: “Indian’ internet companies are starting a lobby group. The aim seems to be to keep foreign companies out. Your views?
Amit: I'm really focused on what really is good for India. Something like e-commerce happens once in a generation, and the right kind of e-commerce in India, like I said, would bring a new kind of democracy in terms of access, in terms of choice, in terms of aspirations. That anyone anywhere in India should be able to realise what they aspire to be without any barriers.
It requires huge investments to change a large country like India. So, capital flow is good for the country. We are very focused on investing our capital on infrastructure. Almost 40 percent to 50 percent of our capital goes into building infrastructure. This includes building the technology, logistics and empowering people to build connections with global e-commerce companies, and so on. And we are seeing the impact of it. At the end of the day, customers will choose the service that provides them with a better experience. So that's what we are focused on. In my opinion, for Indian e-commerce focusing on anything other than transforming India using e-commerce is a wasted opportunity in terms of using your intellectual capability to do something useful.
Q: A lot of money has been invested into Indian e-commerce and yet only the surface has been scratched…
Amit: That is not what we see. We have 150 million registered users.
Q: But how many of them are active?
Amit: We don't talk about it but I would say it is more than any other number that you would see out there.
Q: Because the number that we have from the industry is close to 60 million regular users.
Amit: Even if it were 60 million in the period of the last four-and-a-half years, it would be a very large segment. Even anecdotally, we know e-commerce has one beyond the early adopters. We got a letter from a monk who lives at the foothills of the Himalayas who thanked Amazon as he is able to buy stationery items and supplies to teach children that they could not access before, and there are mothers who have written to us saying that even though they have shifted to a remote part of India they don't find any change in their food styles, as thanks to us, they can access their local masalas.
If the question is that is it early? Then yes, I say it absolutely is early. But it is by no means a phenomenon that only affluent people in large cities are shopping online.
Q: But it has taken so much investment to get this set of people to shop online. How much more investment is needed to get the next set of people online?
Amit: You have seen the flywheel, right? We took three years to get the selection we could get in one year. Which means the next set of sellers came because of the flywheel so they don’t require the same degree of investment. Also, the investment is ahead of demand. So, if we build out a logistics connection to 200 cities, we are not going to build it every time we get a new customer. You are going to build it once.
I think a lot of the stuff that is happening now in terms of investment is actually going to give returns in the next seven years. Because if we had to serve only top customers, then we wouldn't have to spend so much to bring them online. They would have shopped on Amazon anyway. If you see the affluent class of India, they usually have someone who is working in America and hence would already know about it. It is something like an Amazon Prime Video—it is something way ahead. These are things that we are trying to do that would pay off in the next ten years.
Q: So, for investments like into logistics, do you think that it has reached its saturation point?
Amit: It will never reach its saturation point. Why can't you deliver in 30 minutes? Why can't you deliver in more cities next day? Why can't you deploy more items to customers, closer to customers? This is very early. We focus on logistics even in America to help customers get faster services. And it's not necessarily infrastructure but also the technology a lot of times.
Q: Will we see things like Prime Air in India?
Amit: Maybe, at some point in time. It should make sense at the right scale, and we will also have to accept COD or we will have get drone arms to accept cash.
Q: Amazon has got the FDI approval for grocery and food. What’s the update there?
Amit: We have a few things that we are doing already in grocery. In the top four cities, we want to get it to you in one hour. That's what our Amazon Now offering is. We have been very focused on testing that offering, and we are in no hurry to either expand pincode within those cities, or expand the selection. This is meant to be a Prime convenience, and as we build a Prime member base they will adopt it as soon as we liberate it. So, we have been very consciously doing in a small footprint in these four cities to get good at it. That’s Amazon Now.
Then we have Amazon Pantry. Which is saying that we would expand our footprint to 30- 50 cities— from 34 cities currently — and we would expand the basket of items you need every day to a few thousand, and that would be available to you at the cheapest rate no matter where you benchmark it against.
If you go to Pantry, I can guarantee you that you will save money as compared to anywhere else. But we are trying to get good at it because to do that you need to build cost structures so low that you can pass the savings to the customers. So the team is working on that and we are getting very good traction in terms of repeat purchases, basket size etc.
The third thing is what we call as Subscribe and Save. Which is for the things that you need at a certain frequency so why even order. We will get it to you without any clicks.
Q: And I was told people subscribe even toothpaste.
Amit: Yes, because that is an obvious thing. And there we are seeing a very healthy increase in the number of subscribers. And the fourth one is Speciality Grocery. Where stuff that is just not available around you and could be available anywhere can we get it to you—be it the Italian sauce or the Mediterranean paste etc.
So that is the spectrum of things we do in grocery. All of them are in different stages of getting better and we are in no hurry, and whatever footprint that they have right now they are growing very well and growing very rapidly and more importantly showing great customer adoption. We do have a licence to be a retailer ourselves. We are working on a plan, so stay tuned.
Q: Any timelines?
Amit: I don't have timelines right now, as these services are in different stages of evolution.
Q: But there is a plan to have your own label?
Amit: We have private labels in many categories right now. Our programme is designed around using customer insights by looking at actual customer usage data, feedback, reviews. We share these insights with OEMs or manufacturers — people who have capabilities that we consider eligible for our programmes. We look at social responsibilities, safety, how good their quality is, so we look at many metrics. We then work with them to launch their products on Amazon. So we have private brands in our softlines, in mobile phones, in accessories. We have in food as well. It is called Happy Belly. You should should try it.
Q: How big are private brands for Amazon?
Amit: We don’t share that. I think it is very early. One thing to realise is private brands depend on traffic to get traction, so as you grow they will also grow.
Q: Which are the categories that are kicking in for Amazon right now?
Amit: One thing exciting for us is if I look at the unit share across all of these categories they are mostly evenly spread. I'm looking at the groups as consumer electronics, wireless, Softlines, Consumables, and other Hardlines. If I just look at fashion, although we don't talk much about it, I have been saying that it is our fastest growing category.
When we look at the IMRB data, Amazon fashion in the festival season on a standalone basis has the most transaction share (compared with the competition) but if we add other subsidiaries (of the competitor) we are slightly behind. But we are growing significantly faster. I'm trying to tell you that in this methodical way of offering better input and improving your execution every year, you eventually do catch up. If I look at these four groups, they are pretty evenly distributed so they are almost 25 percent each. It is very healthy for us as we are not overly dependent on one of them.
Q: In terms of investments, according to the estimates that we have, you have invested over $2.5 billion this year. In terms of investments, how much do you see Amazon investing over the next year or so? Have you exhausted the $5 billion?
Amit: We don't talk about it, but it's important to note that we are not going to hold ourselves by a number to decide how to transform a country.
We are here for the next 100 years, so, to me, I think the $5 billion is a directional number to indicate that we are serious about it and ready to invest whatever it takes to change the way India buys and sells. I think in the years to come, India will need a lot of investment.
Q: What’s happening with your Shoppers Stop investment? Will we see more investments into other offline players?
Amit: Shoppers Stop is a unique case, and we saw that there was a big opportunity for us to provide our fashion customers with dramatically more selection by partnering with them. It could morph into other things in the future. But the base reason was to increase the range of selection. If it makes sense to invest in other companies, then sure. We are always looking at how our core will become stronger. But we are very selective and look if the company has the right kind of team, are missionaries, offer value to our customers etc.
Q: Give us a sneak peek into what Amazon will do in 2018.
Amit: I think it will be the same things. I would rather have a business that sounds repetitive, boring and consistent, than have a company that changes its philosophy every year. Which is what you hear elsewhere. We will be focusing on the same three things. We will keep adding more selection, but more and more products will reach the customer faster. If you look at just Prime, we started with two million products that were eligible for Prime. Now it is 11 million.
We continue to make shopping more and more affordable for aspiration. So, this year we launched a lot of things that we didn't have last year. We added no cost EMI, buy-back, exchange, installation, repair etc - a lot of the things that make it affordable to buy and remove barriers.
You will see us launch more and more products that will make it easier for customers to buy from us in addition to being price competitive. Our goal is that we make more items usable by the customers, and we have seen that a lot of Indians require help and we talked about exchange, installation etc and the convenience around it. Prime will continue to be a big investment area. At some point, Alexa will come out of invite-only. We will launch Prime Music. Prime benefits would keep getting better. The way to make it better is to get more selection. If you have two websites--Amazon.com and Nile.com. If Amazon had 50 million products that come to you next day guaranteed, and the other one has five million, which one would you sign up for?