Amazon has launched a new online marketplace in India as it seeks to further establish itself in one of the world’s fastest growing ecommerce markets

Amazon’s India site will handle packaging and delivery for third-party sellers

It is expected to grow from its present value of $1.7bn (£1.09bn) to $22bn (£14.17bn) by 2018. The launch brings the number of country-specific Amazon marketplace sites to 10.

In order to comply with foreign direct investment (FDI) rules, the site will only sell items from third parties, initially offering a selection of books, movies and video products. Categories such as mobile phones and cameras are to be added in the near future.

Amazon entered the Indian market in 2012 with its marketplace site

That was thought to be a test-bed for a full Amazon launch in the country. Having been given FDI approval last year to set up a logistics business in India, Amazon will now be able to handle the packing, delivery, returns and customer service of its third-party sellers, providing it with a distinct advantage over rivals.

Despite being unable to sell its own goods online, Amazon can maximise revenues, and the potential of online in the country, through the provision of services including ‘Selling on Amazon’ and ‘Fulfilment by Amazon’. Doing so will enable Amazon to alleviate the barriers preventing many in the country from shopping online, while encouraging internet-savvy shoppers to choose it. For example, providing consumers with the option to pay with cash on delivery gives it an advantage.

According to Planet Retail’s ecommerce shopper insight research in India, flexible payment options, such as cash on delivery, will encourage 53% of shoppers to buy more online, while the option will influence 52% of online shoppers to choose a retailer.

However, Amazon is not alone in hoping to exploit the opportunities available in India.

eBay recently led a $50m (£32.2m) investment round in India’s online marketplace Snapdeal. In addition, domestic rivals Flipkart and HomeShop18 are upping their game, intensifying competition.

The latest move by Amazon makes perfect sense - getting round FDI restrictions to maximise growth potential while providing services that will remove barriers to online shopping in India and appeasing shoppers already active on the web. Not only is the new marketplace set to become Amazon’s main portal in India, it has the potential to gain a sizeable share of the rapidly growing ecommerce market.

  • Malcolm Pinkerton, research director - ecommerce, Planet Retail.

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