Amazon Launches In India With Marketplace Model

Online retail giant Amazon.com, Inc. (NASDAQ:AMZN) launched its store for India, Amazon.in, on Wednesday, aiming to get a foothold in the country’s booming e-commerce space.

Unlike its other country-specific stores and the flagship Amazon.com online outlet, which sells Amazon products along with that of other sellers, the Indian edition will be a marketplace that sells only third-party products, because the country's FDI regulations prohibit foreign online retailers from selling their own products in India.

"Even in invoicing, they are making it very clear that the seller is not them," Sajai Singh, a partner at J Sagar Associates told The Economic Times.

Amazon.in is the Seattle-based retailer’s tenth country-specific online store. To begin with, the India store will sell printed books and DVDs and Blu-ray discs of television shows and movies, before expanding to cell phones and cameras in coming weeks.

"The launch of Amazon.in is definitely good news for the e-commerce sector. The market is huge in India and there is opportunity for all players who create a huge customer proposition," Aashish Bhinde, executive director of Avendus Group, told The Economic Times.

According to Internet World Stats, India has about 137 million internet users and is the world's third-largest online market behind China and the U.S.

“Our vision is to become a trusted and meaningful sales channel for retailers of all sizes across India, enabling them to succeed and efficiently grow their business online,” said Amit Agarwal, head of Amazon India, The Hindu reported.

However, Amazon is entering the Indian market at a time when other online retailers are reporting losses and scaling back by cutting jobs and trimming operations.

Analysts blame the current state of the industry to a spending spree by online retailers, flush with venture capital funds, on acquiring new customers without regard for the bottom line.

According to The Economic Times report, quoting people with direct knowledge of the matter, nearly one-tenth of leading online portal Flipkart’s workforce, or 250 employees, have been handed out pink slips in recent months. Jabong.com, another e-commerce operator, has also trimmed its work force substantially, the report said.

Amazon is already present in India's e-commerce space through Junglee.com, which is a price-comparison website. Junglee will continue its operations along with the Amazon.in portal, according to the company.

Amazon's main rivals in the country include Flipkart, Jabong and eBay Inc. (NASDAQ:EBAY). Flipkart, which also had a pure-play online retail model has recently started selling third-party products.

EBay also follows a marketplace model, but it has an online bidding and shopping portal. Last week, eBay announced plans to invest $50 million, along with Intel Corp’s (NASDAQ:INTC) Intel Capital, Nexus Ventures Partners, in its Indian rival Snapdeal.com.