Back in the early 2000s, when you entered a cyber café in an Indian city to access the World Wide Web, your ‘Google’ search would throw up results from a little-known Amazon.com when you searched for a book review. It would have the blurb and reader-written reviews and ratings. This was a US-based startup that sold books online. It was also the starting point of Web 2.0 as we know it now. The internet was changing from being a one-way communication channel to a platform to curate multi-channel communications.

Cut to a decade later, in 2013 – Amazon decides to enter the then fledgling Indian online shopping space with the ‘marketplace’ model, where

third-party sellers would ship their products to Amazon’s warehouse near Mumbai to be dispatched to consumers across the country.

India had about 50 million internet users then. Forty percent of them did have prior experience of online shopping – with Flipkart, Ebay and Indiatimes Shopping, already having made a foray into the online shopping segment. Makemytrip and Yatra had already transformed the booking and delivery mechanism for flight tickets, showing Indians the efficiency of online mediums for day-to-day work. It was also a time when home shopping channels were raking in money from tier 2 and tier 3 cities where internet penetration was almost negligible and DTH and cable TV were the kings and queens of entertainment.

This was an India, shelling out a good deal of money on telecom and DTH bills. India had just emerged from exuberant roaming charges that could bankrupt a first jobber. When travelling to the US, Netflix would be binged upon and free WiFi in public areas would be shamelessly latched on to.

India’s thirst for connectivity and access to quality content was quenchable only at the mercy of regulators and telecom service providers (TSPs).

The evolving online landscape

Data costs have fallen 95 percent since and internet penetration has increased to 500 million as of March 2019. It is further expected to grow to 627 million by the end of the calendar year, of which 290 million or over 46 percent will be subscribers residing in rural areas.

From 2013, this has also been an era of a rise of mobile wallets, a unified payments interface or UPI, opening of bank accounts for the unbanked and India attempting to go cashless – all theoretically supplementing the ease of online shopping, even though cash on delivery has been a preferred option for Indians.

This period from 2013 to 2019 has seen a number of online players emerge and collapse. M&A action has been intense – Flipkart acquiring Myntra in 2014 for $300 million, Snapdeal acquiring Freecharge for $400 million in 2015 and the massive acquisition of Flipkart by Walmart making the biggest headline in pink papers - $16 billion!

As the gladiators entered the colosseum deal after deal, dealing each other often deadly blows, Amazon took a ringside view. It stayed as the number two player by volume according to most reports, with Flipkart leading the share of heart and wallet for Indians who saw the Singapore-registered company as homebred.

Beyond gross merchandise value to value-added life

In FY 17-18, Amazon overtook Flipkart with its GMV of $7.5 billion versus $6.2 billion of the latter on a standalone basis, according to a November 2018 report by Barclays. But GMV in the online shopping space is not the only score to keep. Amazon’s influence on the urban Indian is only growing with new products beyond Flipkart’s present reach.

Today, Amazon is an integral part of a typical urban household. It has made TVs smart with the Fire Stick easily hooking up to WiFi and extending the life of an old TV by years. On the press of a button, access to all OTT platforms pop up – thus, giving traditional DTH players a run for their money.

Amazon Kindle reading devices are helping create space at home, as bookshelves become history and all newly purchased e-books are downloaded to one small device. What’s more – it’s cheaper to buy e-books and the delivery is instant. The Kindle app furthermore reduces even the need to buy the device and offers the same convenience on a smartphone.

It’s early days yet, but Audible is all set to read books aloud, giving literature enthusiasts yet another way of catching up on consuming written content. Globally, e-books are gaining momentum and India would not lag far behind in playing catch up.

Amazon Prime Video and Prime Music bundled with Prime Delivery at a very competitive price can wean consumers away from Netflix or iTunes and also offset delivery charges on the shopping platform in one go.

Alexa’s voice-command-enabled music and news and its capability of controlling IoT enabled light switches and other electrical devices will make a paradigm shift in Smart living, as and when such smart devices gain traction.

Future-ready – yes. But will it survive the new wave of competition?

Reliance Jio is already sitting on a consumer base of 300 million and it’s ARPU is as low as under $2 (average revenue per user between Jan-Mar 209 at Rs 126.2 per month) and a plethora of value-added services and apps on its platform.

About 65 percent of the video consumption in India is coming from rural markets where Jio has hit the nail on the head thanks to a sustained, low APRU. Where broadband and DTH have not gained significant share, Jio has pretty much disrupted consumption patterns.

What’s more – Jio will also spread its wings into broadband with its GigaFiber FTTH service expected to rollout this year. Riding on such infrastructure would be a Reliance Jio ‘super app’ that combines some 100-plus services from payments to ticket bookings to e-commerce. Jio’s existing OTT services like Jio Cinema, Jio Saavn and other news operations will logically offer the backward integration that other TSP players shell out a bomb for.

Adding to the competition are single service OTT operations like the recently launched Spotify music app and the to-be-launched Apple TV+ in India, where incumbents like Hotstar rule the Indian content consumption. This will add further complexity to profitably monetise the highly competitive OTT business.

Amazon, given its focused arsenal of content and smart devices, has a more diversified competitive advantage over pure-play OTT players. It also helps the company bundle more products and services in its, yet, core business of online shopping, hence letting the business deliver more value to the consumer than, say Flipkart.

But with Reliance Jio combining OTT and online shopping, ticketing and payment services as well as having the incumbent advantage of being a leading TSP with the lowest ARPU – Amazon could well discover that its real competition is no longer in the online shopping space alone.

The OTT industry, just like online shopping and telecom in the recent past, is ripe for consolidation. The battle will be fought and won purely on subscriber base and deep pockets and not as much on the quality of the local content available.

If rural India is where the demand is coming from, Amazon will need to re-think its strategy to stay relevant in the era of Jio ‘super app’. But in urban India, Amazon’s unique mix of content, devices and online shopping will give it an edge.

One thing is for sure; whoever emerges from these multi-pronged digital battles, the consumer will be the ultimate winner – spoilt for choice, embracing new technologies and paying lesser than their western counterparts.

Kartik Malhotra is Senior Executive Producer & Editor, Special Projects at Network 18. He is an alumnus of IIM Lucknow and, when not behind the camera, indulges in armchair analysis of strategy and technology.

First Published:May 8, 2019 6:00 AM IST