Amazon spends big on marketing & logistics for a successful festive season & secure ecommerce future

Amazon is willing to do whatever it takes to capture the hearts consumers in India. The US-based firm is willing spend more than $2 billion dollars in addition to the $5 billion already committed to ecommerce in India, claimed a source in the company.

An Amazon spokesperson said, “For Amazon, India continues to be its highest priority investment. We continue to look at India as a key growth region and are committed to invest aggressively with a long-term horizon, and transform the way India buys and sells.”

Amazon is spending mostly on marketing and logistics this time to ensure its ecommerce success.

Amazon marketing this festive season

Amazon has realized it is essential to have as many marketing deals as possible to move ahead of Flipkart. As a result the etailer used at least Rs. 150-200 crores to market its Great Indian Festival sale. This is at least 3-4 times more compared other competing etailers. According to Amazon, its marketing budget for this season is the largest so far.

The global online retail giant is going beyond discounts this time. The company is actually offering freebies to those customers selected through a luck draw. The biggest prize up the etailer is offering is a 60 lakh worth 2 bedroom house in North Bangalore. Amazon has formed ties with Brigade Group property developers to make this possible.

Other prizes include:

  • 2 Chevrolet Cruze cars – Rs. 20 lakh each
  • 8 Chevrolet Beat cars – Rs. 4 lakh each
  • 3 nights and 4 days all expenses paid trip for couples in Dubai, travel agency Musafir

Director of Amazon India’s consumer and digital marketing, Kishore Thota, said “We are not looking at return-on-investment at this time of the year, we are looking to broaden our base.”

He stated that it is a sign of ecommerce maturity in India now that they could have a gifting model in place. This is something that existed only in offline retail until now.

“It is encouraging that we could rope in several partners to sponsor these gifts and give depth and breadth to our campaign,” he said.

Amazon logistics this festive season

Just before the commencement of the festive sales, gained 2 new fulfilment centres in Tamil Nadu. This August, the etailer introduced a new Urban fulfilment centre at Chennai.Amazon seems to have added another to the city and one in Coimbatore. With these two in the mix, Amazon obtained more storage of 9000,000 cubic feet.

In June, the ecommerce company invested $3 billion in its Indian business. Experts believed that these funds would go towards logistic and supply chain improvements and it certainly looks like a good portion has. Last Monday, the etailer set up a new warehouse in the Delhi-NCR. This is the 7th of center in the NCR.

Amazon’s fulfilment capacity in India

The foreign online marketplace maintains a storage capacity of 7.5 million, with 27 plus fulfilment centres in about 10 cities throughout the country. Compared to when it started out in 2013, the etailer had only 100 sellers onboard. Now, Amazon has:

  • About 1.20 lakh online sellers
  • 8 crore products for sale
  • 100 various categories

With the help of the new fulfilment centres, Amazon believes it can offer faster delivery during the festive season.

The vice president of Amazon India’s customer fulfilment, Akhil Saxena said, “For our customers, these FCs bring us closer to them in the region and will not only support our Prime promise of one-day & two-day delivery but will also allow us to efficiently serve them this festive season. For our sellers, these FCs will enable thousands of small & medium businesses to save money by replacing their upfront capital expense with low variable cost and pay only for the storage space they use and the orders that we fulfil,”

Are the new fulfilment centres different?

The two new storage and fulfilment units from Amazon are not like the others in a way. The new units are fitted with highly automated pick, pack and shipping facilities for timely. Efficient and safe order processing.

“Our fulfilment centre will provide local SMEs with a platform to sell their products such as handicrafts, apparel, home decor, jewellery etc. to millions of customers and scale their business to greater heights. They will also create numerous employment opportunities for the youth in the space of ancillary businesses such as packaging, transportation, logistics, and hospitality across the state,” Akhil added.

Expectations for the 2016 festive season

Akhil also claims that the year end festival season is the time when online sales soar. The last three months of the year account for more sales than the previous 9. This year’s Diwali sales will be even bigger, he mentioned.

In 2015 itself, the sales numbers were much phenomenal compared to the previous year. And with its collections of widespread fulfilment centres, the etailer can guarantee next-day delivery for about 14 lakh products, including home appliances and FMCG.

The results of this festive season sales will determine who will be on top. According to RedSeer Analytics, last year, ecommerce players did business worth $1.5 billion in India. During the festive season, sales are 3 to 4 times higher than on usual business days.

But the real question here is, will Amazon recover the amount spent to call this festive season a success? Or will losses haunt the etailer long after the festive season?

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