Amazon in India

Amazon in India has now been a reality for some time. It has managed to get good market share among Indian Customers with its VAS of Amazon Prime & Prime Video.

But what is so special about Amazon Prime?

Going by the last few annual reports of Amazon, it was seen that only sales were taken into consideration to show the revenue. However, with subscription services like Amazon Prime, Amazon Prime Video and AWS it has become necessary to show the subscription fees as deferred revenue (revenue that has not been earned). Having born and brought up in India I feel these three services are going to work in the Indian market where price sensitivity and customer service is what will bring the most amount of business to the company.

I have shopped from Amazon India from the year they began operations here and the Amazon Prime launch was so perfectly timed in terms of bandwidth of the internet, festivals and people getting accustomed to E-Wallets, Credit Cards, and Debit Cards.

Increased bandwidths in India

The internet usage is increasing in India at a really rapid pace and so is the supply for the Internet. Even if you are in the villages of India the 4G networks are still strong allowing people to surf the internet in a much better manner than a year before. About 97 % of pin codes in India have placed at least 1 order on Amazon India. This is a brilliant statistic!  If I have to talk about the fixed internet/wifi connections at homes then they are nothing less than 50 MBPS which is fantastic to watch online content.

Hunger for On-Demand Video in India 

The number of investments to produce home-grown content for Prime Video in India has also increased which is giving a tough competition to Netflix India. People do argue saying that Netflix has/had better Content but Prime Video signed up with production companies and got back Indian movies that were difficult to find in neighborhood video stores. Add to that homegrown production with Excel Entertainment for Inside Edge. A show that brilliantly shows a story on Cricket (which is nothing short of a religion in our country) and the topic of ‘Betting’, around which we had so many stories in the past that people are glued to the TV sets to watch a story about it. And it’s amazing to notice that this show has most newcomers in the cast and has got great reviews, a bet that is difficult to take in a country like India where you want to launch something as new as on-demand video and where people are obsessed with movie stars.   

USP of Amazon Prime Video

If I have to talk about the USP then Prime Video is definitely a better subscription compared to NetFlix India because of its added advantage of faster deliveries via Amazon India. And not just that, it costs less than $10 for a year (Prime Video + Prime Access on Amazon India included) where on the other hand Netflix is close to $8 for a month for their cheapest plan. Thus a higher price would limit its growth in the country. Which would not have been the case had Prime not arrived so soon in the market.

Looking at these factors – Prime is slated to be a winner at least in India in both long and short-term.

The Number Games

This brings me to numbers, according to an article in Forbes India (dated 28th Aug 2017), one in three orders on Amazon India come via Prime. That means 33.3% of all orders are via prime itself. And we are talking orders here not 33 % customers so if 33% of your orders are via Prime it would also mean that it would be driving repeat purchases. This opens up the massive ‘gift box filled with data’ around shopping patterns that help you with better forecasting and that would also help you to make the supply chain more efficient. The same article also stated that since Dec 2016 Prime subscriptions doubled after the launch of Prime Video and from Jan to May 2017 the purchase of these subscribers doubled too.

Though there are no subscription numbers available, Amazon India’s manner of creating events by naming them ‘Prime Day’ is going to create aspirational value amongst customers. I personally share my experience of Prime and Prime Video with my peers and friends and it’s quite certain that most people are doing the same which is why the increase in the customer base. This type of consumer behavior increases Amazon’s deferred revenue which may always be profitable to Amazon. The analogy being a gym membership – you may subscribe to the program but you may not always avail all the benefits from it. Out of 100 customers who signed up for prime, there will still be customers who haven’t utilized the service fully.

According to Fox Business (How Much the Average Amazon Prime and Non-Prime Member Spends Each Year, by Joe Tenebruso dated April 29, 2017) in 2016 alone, Amazon earned $6.4 billion from Prime subscriptions, up from $4.5 billion in 2015 and $2.8 billion in 2014. This is a phenomenal growth in the past few years and it is definitely generating brilliant deferred revenue for Amazon. If I have to specifically talk about India then deferred revenues have potential as people do like to pre-pay for their services here if we have the right proposition. Prepaid telecom services are preferred choices than postpaid because it’s just really easy to track the expenses. Credit Cards aren’t winners in India, Debit and Gift Cards are and this trend will continue because in some parts of our transactions we like prepaid. We like to book flights early, we like to book train tickets early, and so is the story with Cars, we love to book them and most of us have waited for months until delivery.

For any company to generate good deferred revenue in India – create a good value proposition for the service, be consistent in the delivery and the customers will shower the company with subscriptions!

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Categories: Business


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