Here’s How Amazon Can Dominate The Indian Online Grocery Market

Amazon (NASDAQ:AMZN) believes that India may prove to be the next growth region for its e-commerce business.  According to a report by global payments firm Worldpay, India is likely to become the second largest e-commerce market in the world, competing aggressively with China for the top position, in the next two decades. The study expects e-commerce volumes in India to grow at 28% each year between 2016 and 2020 and reach $63.7 billion by 2020. Amazon is ensuring that it is well poised to capture this growth and become a strong player in this high potential market. The company has invested heavily in the region and is offering several perks to its Prime members in the region to build a strong base of loyal users.

Amazon is now looking to grow in the region’s online grocery market and reports suggest that Amazon is holding preliminary talks with Big Basket, a popular online grocery site in India, about a possible acquisition. As consumers look for convenient options to shop for grocery, several models to provide this convenience have emerged in India. Players such as Big Basket follow an inventory model where the company has its own inventory which is managed based on demand. Other players such as Grofers.com follow the hyperlocal model where the order is executed through purchases made from store retailers and delivered to the customer. Although there are several players looking to capture market share, most of them have not been able to successfully execute in this segment. With its experience in other markets and deep pockets to invest significantly in technology and logistics, Amazon is likely to overcome these challenges. If it acquires Big Basket, it will have a strong base to start in the Indian online grocery market and the company could become a dominant player in the segment in the long term.

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Ability To Meet Challenges, Drive Growth In The Segment

Big Basket is the strongest player in the Indian online grocery segment, and its turnover grew by more than 200% last year.  However, its losses are mounting as it invests in technology and logistics for faster deliveries. If Amazon acquired Big Basket, it could leverage Amazon’s existing logistics network in the country and existing customer base. It would be a natural extension for Amazon’s existing customers to use its platform for grocery shopping, since the company has already established itself in the region and is a strong brand. Amazon has the capital to invest in the grocery business in India and can solve for challenges such as faster delivery. While the online grocery market in India holds strong growth potential, currently no player has been able to become profitable in the segment. If Amazon acquires Big Basket, the largest online player, it will be off a strong start in this segment.

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