Amazon is banking on multiple levers to expand its reach. Hence, retail as well as FMCG players will see much more action in the coming days as the offline-online partnership gathers momentum.
The penchant of Amazon to venture into brick and mortar business prima facie looks counter-intuitive. For a consumer-facing company like Amazon, superior customer experience is what matters and hence the foray into brick and mortar format comes as a logical extension.
In the US market, a glimpse of this strategy was visible when Amazon acquired Whole Foods. However, the global e-commerce giant has adopted a smarter strategy in India so far wherein it has picked up a small stake in Shoppers Stop. But Amazon continues to be in the news on tie-ups and partnerships as it tries to service each and every micro market well. It is relentlessly trying to customise its offering by mapping suppliers with the end user segment in its e-commerce platform.
While its recent partnership with Dabur whereby the Indian FMCG major will get to sell its Ayurvedic products through Amazon’s market place in North America is a case in point, we feel it is just the beginning for Amazon. So watch this space.
Global e-commerce platform provides an easy reach for FMCG players
Global e-commerce has picked up in the last few years, primed by platforms like Amazon’s global market place, Alibaba’s Tmall Global and JD Worldwide. Amazon’s global market place, in particular, has made a mark for itself by helping local sellers sell on global locations through its platform. Its global selling programme, launched in 2015, has attracted interest from more than 25,000 Indian sellers.
Amazon has recently inked deals with FMCG players for selling their products in international locations and hence providing distribution advantage. Companies like Patanjali, Godrej Consumer, Marico have been selling their products in the US website of Amazon.
In the case of arrangement between Amazon and Dabur, the latter’s products would be sold in USA, Mexico and Canada through Amazon’s platform. Dabur has about 31 percent of sales (Q1 FY2018) from international markets and this would help increase the reach of company’s Ayurvedic products internationally.
Patanjali products in Amazon.com (USA)
Digital medium gets centre stage for certain end users
Recently, FMCG players have clinched exclusive deals with the online marketplace aiming at capturing certain clientele and distribution reach with differentiated product offerings. Nestle recently launched its new range of Maggi noodles, Nutri Licious, at Amazon before anywhere else. The company’s objective was to address consumer segments like millennials who are more inclined to purchases online. Media campaigns by the company are also skewed towards digital channels for the products popular among youngsters. Nestle recently launched Kit Kat dessert at another e-commerce platform - Big Basket.
Amazon is also adopting a strategy whereby on one hand it is making a global platform accessible to local sellers; on the other hand, it is helping local sellers customise their offerings in their local market.
Brick and mortar forays for grocery retailing
That said, Amazon has of late realized the importance of the brick-and-mortar format as well to cater to certain product categories requiring consumer experience and convenience. The Amazon Go store concept in the US is one such attempt, wherein consumers avail a hassle-free shopping experience.
Indian experience: Online and offline combo
Amazon’s acquisition of Whole Foods was another big move to foray into food retailing. Some of the Whole Foods products are now cheaper by 40 percent. Indian markets was also expecting a disruptive strategy from Amazon in the food grocery market. However, instead of waiting to execute an M&A transaction in this space (eg: Big Basket), the company opted for a minority stake purchase (5 percent) in Shoppers Stop. As we mentioned in our previous article, Amazon could use this opportunity to expand its reach in the grocery segment through Hypercity.
In the perishable goods and grocery market, it may help to provide product experience to customers through such brick and mortar outlets. This dual combination of offline and online channel is gradually picking up. Existing retailers having brick and mortar formats like DMart have recently started with their online version – DMart Ready. Similarly, Tata Group has announced online grocery business (Starquik brand) channel for Trent hypermart.
In case of Amazon, small ticket investments in retail formats helps in gaining benefits of brick and mortar format without investing heavily, particularly, when they are still experimenting various modes of reaching out to consumers. In this context, it may not be surprising if Amazon reaches out to other major brick and mortar retailers like V-mart to penetrate into tier 2 cities and towns.
Overall, Amazon is banking on multiple levers to expand its reach. Hence, retail as well as FMCG players will see much more action in the coming days as the offline-online partnership gathers momentum.Moneycontrol Research Page.The Great Diwali Discount!
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