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Monday, November 17, 2014

AMAZON PLANS IT BIG WITH INDIA POST NETWORK TO RAMP UP ITS DELIVERY MECHANISM

NEW DELHI: E-commerce giant Amazon wants to do in India what Alibaba did in China. Amazon's India head Amit Agarwal on Tuesday met telecom and IT minister Ravi Shankar Prasad and urged him to allow the use of new technologies such as real-time tracking and monitoring devices on the India Post network to develop a delivery mechanism based on smart logistics.

The government has sought a detailed proposal from Amazon, to which it will respond, a person familiar with the details of the meeting told ET. Amazon wants to leverage an improved India Post network to ramp up its delivery mechanism to within 24 hours anywhere within the country.

Agarwal was accompanied for the meeting by Monique Meche, Amazon's vicepresident for international public policy. In an emailed response to ET's query, Amazon said that it is "looking for ways to deepen" its relationship with the Indian postal service which started last year. It currently uses the Indian postal services as a delivery channel, but it is looking to deepen this further, in line with what Alibaba did in China.

Alibaba was the first e-commerce company to tie-up with a government postal agency in China. Right before it hit the capital markets with a multi-billion dollar issue, Alibaba tied up with China Post to share warehouses, processing centres and delivery resources, all part of a smart logistics network providing easier and faster delivery services to online sellers. Prasad also discussed prospects for pushing trade and commerce in rural parts of the country in a big way and how e-commerce websites such as Amazon could play a big part in giving a platform to small-time retailers and entrepreneurs in the hinterland through its market place models. 

With over 1.6 lakh post offices throughout the country with the lion's share of 1.4 lakh in rural areas, India Post claims to have the largest postal network in the world, according to its website. On an average, a post office serves an area of 21.2 sq km and a population of 7,175 people.

"Speed of the last mile delivery to a customer will be the most decisive factor in an already price competitive e-commerce landscape and Amazon wants to leverage on the well-penetrated postal network," a second executive who did not want to be identified told ET.

Interestingly, Amazon's proposal comes in the wake of the special task force constituted by Prime Minister Narendra Modi in October to enhance the role of India Posts in financial inclusion and trade. The committee headed by former cabinet secretary TSR Subramanian will submit its report by the year end. India Post had also tried to get a banking licence but had failed, and is now looking to become a 'payment bank', one which can accept deposits and remittances but cannot lend.

"The government would obviously review any proposals made by Amazon under the light of the recommendations made," the second official said. On a lighter note at the meeting, Prasad referred to Amazon's arch-rival, homegrown e-commerce major Flipkart, and asked Agarwal who would win the e-commerce war between the two majors in India. "The consumer," Agarwal responded.

Surging growth of the e-commerce sector in India has led to a fund-raising spree by companies in the sector. Most recent being Japan's Softbank Corporation's $627-million investment in Snapdeal, which was preceded by $1-billion fund raising by Flipkart. A day after Flipkart concluded its fund raising, Amazon committed investment of $2 billion in India. In the meeting, Agarwal further discussed setting up of a data centre in India for which the company readily agreed to put up a server. Microsoft was the first technology giant this year to announce the setting up of three data centres in the country.


These data centres will enable access to customers in banking and financial services as well as the central and state governments. Many such services are currently legally restrained as they require data to be hosted within the country. Owing to which Amazon put forth the proposal to set up a server within India.

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