The revival of the economy will come from helping merchants, retailers and brands reboot their businesses and tap into the heightened demand being generated online due to the Covid-19-induced lockdown in India, according to a top Amazon executive.
The Seattle-headquartered online retailer which had seen its operations come to a grinding halt when the nationwide lockdown was implemented in March says it has been able to fix its supply chain since then and return to normalcy.
In an extended interview, a part of ET’s ongoing CEOs on the Frontline series, Amit Agarwal, senior vice-president & country head of Amazon India, tells Alnoor Peermohamed and Samidha Sharma about how the e-tailer is seeing a large number of physical shops and sellers onboard its platform as consumer demand shoots up for the web retailer.
Why was Amazon unable to function in the initial few weeks of the lockdown even as kiranas and physical stores serviced consumers for essentials and groceries?
Our number one priority globally was to ensure the safety of employees, selling partners, and customers. We wanted to put guidelines in place so that employees, partners, and customers feel safe.
The other priority was to work lockstep with the government. It was not our choice to shut down but it was the guidelines and rules that we led to us not being able to operate. We were not allowed to operate anything other than essentials, and were asked to secure specific curfew passes for from district authorities for every individual on ground-which is not a trivial task. We didn’t want to take any risks like other stores or anyone else.
That process took us time and we were not serving essentials for a week or so but we started opening in pin codes selectively as we got curfew passes.
How’s the comeback in your operations been like over the past two months?
Phase two was to get our essentials networks back to normal. Due to safety measures, the lack of capacity because of curfew passes, and surge in demand by customers resulted in the outcomes that we saw.
Today, Amazon Pantry’s deliveries are pretty much back to normal along with our fulfillment and seller network. Our new feature Amazon Fresh which we launched during the crisis is overburdened because of super high demand and we are taking orders for up to six days out.
We are now in phase three of the lockdown, as we received permission to operate in all zones with all products except containment zones. We have still to open cash on delivery in some hotspots in red zones but pretty much we are open everywhere and our labour capacity is back to normal.
Is this demand temporary or you see a shift in consumer behaviour towards online retail?
We are hiring and expanding networks as we see very high demand as you’d expect. Customers know e-commerce is the safest way to get what they need and sellers know that e-commerce is the best way for them to serve their customers as their footfalls have been impacted..We are also seeing a day-over-day increase in the number of sellers signing up to get onto Amazon.
It’s been a little over a week, but it is not clear if this high demand will sustain at this level. This is because there were a lot of customer needs that were painted as non-essentials which was actually a priority for many people.
When you are working from home you need items like cables, laptops, chargers. When you cook more at home, you will buy dishwashers, which sold 31 times more than pre-Covid-19 levels and robotic vacuums sold 33 times more compared to before the lockdown. Bicycle trainers, dumbbells and weights, trimmers are all selling well.
You said e-commerce could play a part in reviving the economy. A lot of people say sales, discounts could push demand…anything planned?
The revival of the economy is going to come by helping sellers get back on their feet and making sure that in totality, between the reduced footfalls and increased online demand, they come out to be as good, if not better, than before the crisis. We’re focused on that right now.
Sellers should be able to get to customers wherever the customers are. That service itself is a huge booster of the economy. Right now customers are barely trying to get their needs satisfied and sellers are barely trying to get their businesses online, and the demand is very high. So the natural cycle of shopping is not a festivity and sales.
What else needs to be done to get the economy on the path of recovery?
There is so much that needs to be done for jobs and economic uncertainty. We’re doing a very small bit of what the country needs. I’m not saying that 50,000 jobs will suddenly get India back on track, but 50,000 jobs is a welcome sign of hope in the middle of the bigger thing that we need to deal with. We will continue creating more of them to help out.
What is the uptick in seller numbers on your platform?
We are now picking up at 100% seller locations. We had conducted a survey of 2,000 shops and sellers and 75% of them said they need online to get their revenues back given their impacted footfalls.
There will be more aggressive global selling, as global demand can be leveraged. With Local Shops, thousands of shops have signed up and Amazon is a platform for customers to find shops near them. The demand is high and the seller business is ramping up, but we need to see if this is temporary or it is here to stay.
India was peculiar to have banned e-commerce beyond the sale of essentials however in April there was a change in that rule introduced and later rescinded. Do you think the government’s flip flops on e-commerce was detrimental to overall economic activity?
It is well recognised that in this crisis situation virtual is a safer way for consumers and sellers to interact, especially when there are guidelines for social distancing. I don’t think there’s any disagreement on that. The government has been very appreciative of that fact, but these are very unprecedented circumstances and everyone is trying to figure it out on the go. So I don’t read too much into actions.
The government recognises that Amazon and e-commerce has a very important role to play in the coming months and years to come as we negotiate this crisis.
We have been a very obedient and patient partner in this crisis, where we have complied with every single guideline to make sure that we did not put anybody at risk and they’ve appreciated that. We were very careful in not being trigger happy and just opening up and shipping products, unlike other alternatives.
There was pressure from retail lobby groups which rallied against the decision of opening up of e-commerce. Do you think that led to the change in the government’s stand?
I don’t want to speculate what was going on in their minds that led to that. I think what matters is that we are able to serve customers now and sellers are very happy that they were able to jumpstart their businesses. Not many companies have the scale, patience, and commitment that Amazon and my organisation is supercharged and driven to be part of this phase and help out.
You’ve launched a programme of getting physical stores online. There are players including Reliance trying to do that. Do you think the next phase of e-commerce will be a lot more intertwined with physical retail?
We now have more than 600,000 sellers of different sizes on our platform and many of those are shops. Most of these shops, or businesses, used Amazon already but it was primarily to expand their catchment to reach regional, national, and global customers. Whether it’s Sangeetha Mobile, Vishal Electronics, Croma, or whoever, they are already on Amazon, although in a different name.
What this crisis is doing is that they need specific capabilities to reach customers in their catchment also, because those customers may not come to them at the same rate as they came (footfalls as you call it) as before. So Local Shops is not bringing shops on Amazon for the first time, what it is doing is building specific features that allow local shops to get noticed by local customers.
It’s easy to onboard shops, it’s very hard to make them successful, because you need technology that particularly allows them to be successful. We have been doing this for more than two decades and very optimistic that this crisis has shown a light to additional features we’re supposed to build.
Will you also give us some sense of your existing partnerships and investments in some of the bigger retailers. Have you been able to leverage on that during the crisis?
We have a very good partnership with More for Amazon Fresh and that has truly been firing on all cylinders to service the demand in addition to our own FCs.
Similarly, BigBazaar when it was allowed to only sell groceries, was a very important part of the essential needs through Amazon, and now as all the categories are opening up, we would ensure that we use the inventory pools that they have. It’s the same with Shoppers Stop. Many of these were stopped because of the guidelines, but you would see them participate more strongly than they have in the past few phases of the lockdown.
Do you think e-commerce as a whole will emerge stronger from this crisis and revive demand and consumption keeping in mind the severe hit to the economy that’s been caused by the Covid-19-induced lockdown?
E-commerce has a very important role to play because it’s the safest way for people to engage. We’d made a pledge earlier this year in January, when Jeff Bezos was here, that we would be investing an incremental $1 billion to digitise 10 million businesses in the economy and increase exports to $10 billion by 2025 and create 1 million incremental jobs, I think that pledge holds even more for us given that our strategy is more relevant than ever before. I think now the onus is on us to make sure we responsibly execute on that.
You said Prime Video and Kindle are helping creators at this time. How’s the growth been for these products?
One thing that gets missed out from this picture is the important role Prime Video and Kindle are playing in giving a livelihood to creators and authors.
We are super excited that we’ve been able to help customers stay entertained and have some peace of mind when there’s so much uncertainty around them. Recently we announced that seven movies are going direct to digital, it’s very good to see that happen. Customers and partners will benefit from that. Prime Video is doing very well.
Amazon has started food delivery in select locations of Bengaluru. Tell us a bit about how food delivery fits into the company’s vision?
Prime customers have been telling us that in addition to getting fresh produce delivered, they would appreciate it if we could add prepared meals on Amazon. We have been getting that feedback for quite a while and it was essentially on the back of that feedback that we started testing this service. That feedback became stronger during the course of this lockdown, because they (customers) were stuck at home, and we thought that we were ready.
This is not a pilot, it’s a launch. Having said that, we will have to see how customers respond, which pin codes our customers are calling out this, and where it makes sense. It’s too early for that to happen, and we’re in no hurry. It’s a very responsive service in the sense that we’re making it available in pin codes where customers want it.
How has new user acquisition been during the past two months?
It’s kind of early to say, because in the initial phase with only essentials and then non-essentials opening up, but clearly we’re seeing a lot of new customers try Amazon. Also, new users tend to use payment on delivery more than existing users, because they’re trying out the service, and in that sense, we’ve been opening up payment on delivery in the last week based on the zones and the infection risks that are there.
Overall, yes, there are new users trying out, Prime members and existing settled customers are buying a lot more than they normally buy, and I see that trend continuing. More than new users, we’re also seeing new sellers join the platform at a faster pace than before.
Have there been more sign-ups for Amazon Prime amid the crisis?
Prime in India continues to be the fastest-growing for Amazon globally. I don’t have any numbers to share, but the signup rate remains healthy with more customers wanting essentials and more customers wanting to stream content.
(Illustrations and graphics by Rahul Awasthi)