Amazon Makes a Major Move, Expands India Logistics to Widen Delivery Reach
Actively Expanding Logistics
With the escalating competitive situation of cross-border e-commerce worldwide, e-commerce giants are placing an important focus on their logistics and delivery systems as a core competitiveness.
Amazon India recently pledged to further widen its operational footprint in the run-up to the festive season with 12 new Fulfillment Centers (FCs) and 6 new Sorting Centers (SCs). Upon completion, the new facilities will provide an additional 8.6 million cubic feet of incremental storage space, which will complement one of the most modern e-commerce logistics infrastructures in India.
Specifically, the new fulfillment centers have come up in top cities including Delhi National Capital Region, Bangalore, and Kolkata. Five of those fulfillment centers—in cities including Hooghly and Tiruvallur—are new for Amazon. Another 500,000 sq. ft. is in six new sorting centers in places like Hubballi and Thiruvananthapuram.
As this expansion takes place just ahead of the festive season, it will strengthen Amazon’s capacity to ensure fast and reliable deliveries and provide a great shopping experience to customers across the country. Abhinav Singh, Amazon India and Australia’s Vice President of Operations, added that, "Our long-term focus is building and managing one of India’s leading logistics networks, with an emphasis on speed, safety and reliability, at a low cost, for each and every customer".
Worth mentioning here is that even this year, Amazon’s India logistics expansion has not abated. Ahead of midyear, it had already built five new fulfillment centers, run by third-party logistics companies in India, and all have been fully in use as its Prime Day preparations began.
Going back further in time, Amazon had begun its commitment by announcing that it is doubling its investments in the existing operational network, particularly logistics infrastructure, to increase the overall delivery efficiency by investing an extra 20 billion Indian rupees (about 1.66 billion RMB) by 2025.
In the end, all of Amazon’s moves just further illustrate how logistics prowess is crucial for e-commerce platforms, especially in the long run. It also has the potential to enable platforms to better control the evolution of market structure, capturing more value.
Heavy Betting on Indian E-Commerce
As we all know, India is a densely populated country and internet adoption is ramping up. These factors contribute significantly to the maturity of the e-commerce market. Thus, at this stage, the Indian e-commerce market is nothing but a chest of vast potential that catches the look of the world's e-commerce giants.
The e-commerce market size in this region is estimated to reach 162 billion USD by FY 2029, as per a recent report published by Redseer, putting it as the third-largest e-commerce market globally behind China and the US.
From the overall Indian e-commerce market, one development trend we cannot help but notice is the low-consumption-side user group is constantly growing, driven by second and third-tier regions, the demand is on the rise and power is enormous. And the good news is that some platforms have already reaped the benefits of this trend. For instance, fashion e-commerce leader Myntra was shocked to realize after a big campaign that second-tier cities and beyond accounted for over 60% of the volume of orders.
This is also taking place in more places. For instance, sales in India by FMCG grew in the second quarter of this year, and online channels have emerged as the significant growth drivers. What’s more, for six quarters in a row, sales growth in rural India has outpaced that in urban India. Of these, the increase in the rural sector was 8.4% and in the urban sector was just 4.6%.
Meanwhile, a few players already have the sense of change and have commenced their operation in the low-tier markets. It was reported earlier that Takealot would invest more in towns and rural areas, such as recruiting personal shopping consultants and increasing logistics warehouses, in order to get ahead in the layout.
Amazon is no exception. Indeed, Amazon has long made second- and third-tier cities a priority. By increasing its logistics infrastructure, Amazon hopes to take a larger piece of the pie in those lower-tier markets, and better compete with domestic and global competitors.
Not to mention that, relative to other e-commerce platforms, Amazon is quite a sticky platform for consumers in India. As per the previously released YouGov rating for brand value index, Indian consumers love Amazon fiercely, it bagged the top position with an impressive score of 56.5 points.
To summarize, the India market has vast potential. While the competition may be stiff, it is brimming with opportunities. For Amazon, the expansion of multiple fulfillment centers and sorting centers in India is a strong practice of its deep-plowing and heavy layout in the Indian market. But keep in mind that market conditions evolve quickly. Although Amazon is gaining on it, other rivals also are steadily evolving and expanding. If the latter wants to further consolidate its leading position in the Indian market, it has to constantly refine its operational thinking and gain a deeper understanding of the Indian consumer, keeping pace with market challenges.
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