Amazon’s new CEO Andy Jassy, a devotee of Jeff Bezos and now his successor, is known for his perseverance, ability to sit through seemingly never-ending meetings and frugality despite his high profile and riches.
Those skills, qualities and more will be put to test as the technology and retail behemoth faces an uphill battle against the Indian government, competitors and antitrust watchdogs.
Outside of its core US market, India is the next big battleground for Amazon, having ceded China to local rivals. For a while it seemed to be winning. The company may claim it still is. But staying on top has become much harder.
Amazon launched its website and entered India in June 2013. Its initial plan was only to sell books, films, TV shows, mobile phones and cameras. India has always been touted to be the next big market for every global conglomerate, but in 2013 India had 50 million active internet users, compared to 600 million today. The stakes are higher than they have ever been
Amazon ran its typical marketplace model which would aggregate sellers and sell their goods on its platform. It also had the unenviable task of catching up with homegrown rival Flipkart, started by two former Amazon executives- Sachin and Binny Bansal. Flipkart had been around for years already and was comfortably perched in the nascent ecommerce space.
Flushed with money from global investors, Flipkart was offering products across 17 categories to over 1 million unique visitors everyday. In October 2013 Flipkart raised $160 million, barely three months after raising $200 million, and taking its funding that year alone to $540 million. In 2014 Flipkart raised another $1 billion- a number so large, even internal employees could scarcely believe it. Flipkart was preparing a war-chest to fight Amazon
Well, two can play at the war-chest game. One day after Flipkart’s billion dollar round, Amazon founder and CEO Jeff Bezos announced to much fanfare- on top of a multicoloured truck- that Amazon would invest $2 billion in India.
A year later, it launched The Great Indian Festival, its flagship sale in response to The Big Billion Day started by Flipkart in 2014.
By 2016, Amazon launched its Prime membership, Prime Video, payments business and a two-hour grocery delivery service Amazon Now in India.
A company which mostly refrained from commenting on competition got embroiled in a nasty war of words when Binny Bansal after the flagship sales of the two companies commented that Flipkart didn't sell "churan and hing" to spurt sale numbers. Amazon India CEO Amit Agarwal quickly retorted that on Amazon people not only bought mobile phones and large appliances but also churan and hing, telling the world that the Amazon was at an inflection point of e-commerce in India.
The two companies had reported similar numbers for their sale season. While Flipkart had taken a minor lead with 15.5 million units sold, Amazon claimed it sold 15 million units during the sale period.
The company also announced an investment of another $3 billion in the Indian market taking the total count to $5 billion.
In December 2016 though, the government issued a clarification on the existing foreign direct invest (FDI) norms making it more difficult for e-commerce companies to use their nearly endless stream of foreign capital to fund high discounts and covered group companies into the ambit of (foreign direct investment) FDI norms.
The rules seemed to be a death knell for companies like Amazon that were operating in India only by means of tie ups or stakes in third party entities.
The government barred e-commerce companies from generating more than 25 percent of their sales from a single vendor. To circumvent this, companies prepared a list of preferred vendors through which they were doing over 90 percent of their business. The rest of the business was coming from standalone vendors on their sites.
In 2018, following rampant protests by offline traders, the government issued Press Note 2 revising the then-existing Press Note 3. It asked the marketplaces to ensure that they will not sell the products of their group companies on their platforms.
However it just took Amazon a few weeks to come out clean of this situation, at least on paper. In February 2019, Infosys co-founder Narayana Murthy’s Catamaran Ventures raised its stake in Cloudtail's parent company Prione Business Services. The move reduced Amazon Asia's stake in Cloudtail to 24 percent from the earlier 49 percent, with Catamaran Ventures’ stake rising to 76 percent from 51 percent earlier.
Following this, Cloudtail ceased to be an Amazon group company, making it compliant with the rules on paper yet not serving the purpose for which the norms were made.
It is for the third time that the government has restricted e-commerce companies from using any "related" parties to do business in India through a proposal on the Consumer Protection Rule.
In the last couple of years, the government has also become vocal in criticising the foreign companies.
Last year Commerce and Industry Minister Piyush Goyal criticised Amazon by saying that "a large e-commerce company" spoke about investing $1 billion in India and made a big song and dance about it adding that they were not doing any favours to India.
This was perhaps the first such direct attack a minister had made on a foreign e-commerce company.
IN June, again, after issuing a fresh proposal to control the way e-commerce companies circumvent the Indian laws, Goyal retorted that foreign e-commerce companies were blatantly flouting Indian norms. According to him, foreign companies were majorly utilising their money to fund discounts given to the consumers which adversely affects millions of mom and pop shopkeepers in India.
Jassy's job in India will not just be to expand Amazon's business from here on but also to restore its relationship with the government amids
It is unclear whether Jassy’s approach to India will radically differ from Bezos’, the person who moulded him. Shortly after the dot-com bust, Bezos asked Jassy to become his shadow—a temporary chief-of-staff-like posting awarded only to the most promising managers. For about 18 months, Jassy followed the boss around every day, sitting with him in meetings and serving as his ears in rooms where Bezos’s presence could throw discussions off track, according to a Bloomberg report.
Bezos in fact saved Jassy from being fired from Amazon in 1997, a few years after Jassy had joined Amazon from Harvard Business School.
Jassy was nearly fired during layoffs in Amazon’s marketing department. Bezos saved him, calling him “one of our most high potential people”, according to Amazon Unbound, a book by Bloomberg journalist Brad Stone.
Jassy totally embodied Amazon values like frugality and humility. He usually wore inexpensive sport coats and loudly trumpeted his enthusiasm for diversions like New York sports teams, buffalo wings and the Dave Matthews Band, the book says.
He has a replica sports bar fashioned inside the basement of his Seattle house where he has an annual Super Bowl party. Bezos came every year until 2019, when he went to the actual game instead
Jassy is known as a man of mechanisms. He expects ideas for new services, names, pricing changes and marketing plans meticulously written as six page documents and presented to Jassy in his twentieth floor meeting room. He exhibits inhuman levels of discipline, sitting in meetings for ten hours a day and digesting dense and complex documents, according to colleagues, the book says.
Jassy, 53, was promoted to CEO of Amazon Web Services- its software cloud computing arm and secret weapon for many years- in 2016. For years AWS’ high margins subsidised costs on ecommerce, entertainment and many other consumer-facing discount-led businesses. AWS was a closely held secret at Amazon, and its numbers weren’t revealed separately until 2015. Even when it was, Jassy was initially against it, feeling it would take away a closely-guarded advantage and let competitors know how profitable a business it really is.
And while AWS is still a market leader, Netflix, Microsoft Azure, Oracle and many others have deployed billions into cloud software and eaten into AWS’ market share, somewhat validating Jassy’s fear.
Jassy’s extensive knowledge and experience of Amazon, its global business dynamics, similarities to Bezos, juxtaposed with his own independent plans for Amazon and relationship with its stakeholders make him a compelling CEO to watch out for.
Chairman Bezos is currently preparing to fly to space, as his deputy and now CEO takes over the reins at one of planet Earth’s most powerful companies. How Jassy’s qualities will help mend the rift created between Amazon and the Indian government could determine of Indian ecommerce, and arguably of business in India as a whole. The stakes are not only high, but higher than what it seems.