Weakness in the Indian market, Amazon is about to stop the supply; The e-commerce giant knows what happened in India

US e-commerce giant Amazon had big dreams for its Indian business. Since 2013, Amazon has invested over $6.5 billion in the Indian market. All these investments were made with the best market position in one of the fastest growing foreign markets. However, not everything went as planned. Amazon on Monday (November 28) announced that it will stop delivery to its Indian unit, which started in 2020. Wholesale distribution was launched in 2020 to more tightly integrate retailers, pharmacies and department stores into its business.

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The withdrawal of Amazon’s wholesale business also follows the closure of some of its other businesses in India as well. Amazon Learning Academy was launched in 2020 during the Covid-19 lockdown. But Online Learning Academy could not keep up with Byjus and Unacademy. So it was announced last week that Amazon will phase out Amazon Academy from August 2023.

Amazon was forced to exit its food delivery business on November 25 ahead of Zomato and Swiggy. The American company’s decision to cut some of its business operations in India comes amid a move to lay off thousands of people globally amid fears of an economic slowdown.

What is happening to Amazon in India?

US-based market research firm AllianceBernstein says India’s e-commerce market is expected to grow from $72 billion this year to $133 billion in 2025. AllianceBernstein estimates that growth will be largely driven by small towns and villages. But US retailer Amazon has not been able to capitalize on this growth as much as it would have liked.

The firm has faced stiff competition from old rivals Walmart-owned Flipkart and Reliance Retail, as well as apps like Meesho, backed by Meta, among the younger generation and beyond India’s tier-1 cities.

Reliance leads the e-grocery/online-to-offline segments with a 15,000-store retail presence and a strong inventory-led model. Flipkart, which is twice the size, has maintained its leadership in the apparel segment. According to a September report by AllianceBernstein.

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New players like SoftBank-backed Meesho are also succeeding in fast-growing Tier II/III cities where Amazon has struggled to gain traction without commissions at low prices. Also, India’s Tata Group is also trying to expand its e-commerce reach. Then the government’s own e-commerce aggregator was launched in July. Due to all this, Amazon is also facing regulatory hurdles in the country.

That is, foreign companies like this are not allowed to own inventory. And no seller on its platform should have more than 25% of the market share. This will turn out to be unfavorable for the organization. The success of retail segments like grocery and FMCG depends on retailers’ inventories and supply chain logistics. Hence, Amazon has not been able to match Indian companies like Reliance Retail in this field. Amidst expected global economic problems, Amazon may either stay safe in India or rework its game plan altogether.

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