Cash crunch, investors’ reluctance to pour funds and heavy losses had compelled Snapdeal and Flipkart to cut costs, starting from last year. On the other hand, there has been no dearth of funds for Amazon India.
However, things are about to change as Amazon has started a cost-cutting initiative. Termed as ‘Get Fit’, the US-based online marketplace has rolled out this plan to reduce expenses. The main objective of this initiative is to reach profitability by 2019.
Amazon India’ cost-cutting moves include:
- Slashing down packaging costs
- Introducing more automation in warehouses
- Making logistics efficient
- Reducing marketing spends and discounts
In March this year, Amazon reduced the payout amount of its local delivery partners. The etailer launched its digital wallet arm to reduce COD costs in April, and discontinued its platinum seller program in June. All this was done to trim down losses.
How to get fit while growing big?
Besides Get Fit, Amazon has another initiative called ‘Get Big’ that focuses on the marketplace’s ultimate goal, i.e. to become the Indian ecommerce industry leader.
While the former is all about reducing expenses, the latter is all about expanding and increasing its revenue. The big question is how would Amazon reduce discounts & losses and increase its reach & sales simultaneously?
“There’s always been a struggle between Get Fit and Get Big. This being Amazon, the Get Big programme will always tend to have the upper hand. When the $3 billion was committed, the US headquarters had sent a clear message to the India team that it has to show the path to profitability within three years. It cannot always be spending unlimited money to win here. But it’s true that if Flipkart starts becoming more aggressive, Amazon will match it,” said a person close to the development.
The American ecommerce giant does have one ammo – Amazon Prime. The marketplace’s customer loyalty subscription service could help to reduce costs and increase revenue. Prime is one of the biggest competitive advantages that Amazon has with visible positive results.
But without digging deep into its pockets, wouldn’t Amazon’s growth momentum slow down?