MUMBAI / PALO ALTO, USA – Amazon’s new commitment to manufacturing in India comes at a growing time against the US e-commerce leader’s attempt to expand its leg in the country’s vast market .
Later this year, Amazon will begin rolling out Fire TV Sticks with the help of Foxconn, a Taiwanese iPhone collector formally known as Hon Hai Precision Industry.
This is Amazon’s first manufacturing mission into India, which follows Apple’s move to collect iPhones in the country.
Last week’s announcement of the production line coincides with Prime Minister Narendra Modi’s “Make in India” plan to build the country’s manufacturing base. But it seems to reflect Amazon’s desire to reduce tough policies against foreign participants in the e-commerce market more than it moves for economic gain.
Operating in India since 2013, Amazon is now locked in a battle for the top spot against local rival Flipkart, backed by US retailer Walmart. Amazon and Flipkart together hold an estimated 60% share in the Indian e-commerce market.
At the same time, Amazon is under increasing pressure from organizations representing traditional mom-and-pop stores and small and midsize retailers that keep an eye on the losing customers. to e-commerce – known as the “Amazon effect.”
Indian Prime Minister Narendra Modi will speak to the media as he arrives in the parliament house to attend the first day of the budget session on 29 January. © Reuters
Such entrepreneurs, known as traders, are a major base of the ruling Bharatiya Janata Party, and the Modi government has tended to fight restrictions against foreign competitors.
In February 2019, the government imposed rules against foreign-owned e-commerce platforms, prohibiting them from marketing products sold by companies in which they hold stakes. The provisions also ended the practice of breaching exclusive buyer contracts with record-owned companies, a way to adopt existing laws against direct sales to consumers. As a result, it was more difficult for Amazon to turn the market on products or to support competitors.
After receiving a series of complaints, the Competition Commission of India, the country’s trust regulator, decided in January 2020 to investigate both Amazon and Flipkart to see if the sale of discount phones is slowing down. go against antimonopoly laws.
The bad winds have caught the attention of Amazon, with founder Jeff Bezos traveling to India in January last year to announce that the company will sell $ 10 billion worth of Indian-made products worldwide by 2025.
“We are investing to create a million new jobs here in India over the next five years,” Bezos said.
Members of the Confederation of All India Traders will protest against Amazon in New Delhi in January 2020. © Reuters
The newly announced production campaign in Chennai seems to fulfill part of that promise.
“Amazon is committed to partnering with the Indian government to achieve the vision Aatmanirbhar Bharat,Amit Agarwal, head of Amazon India, said in the news last Tuesday, using a phrase that means “self-sufficient India. “
Foxconn manufactures the television streaming devices under contract at a production line in Chennai.
Amazon has not released figures on how many jobs will be created, but Ravi Shankar Prasad, India ‘s minister for electronics and information technology, said: “We welcome Amazon’ s decision to manufacture line. will be established in Chennai, as it will enhance domestic production capabilities, and create jobs as well. “
Amazon orders a share of nearly 40% of U.S. online sales, but its international strategy has its share of problems. Due to previous investments in India and other markets, the international sector outside of North America suffered an operating loss through 2019.
The same sector turned an operating profit of more than $ 700 million last year, thanks to e-commerce demand in the pandemic, but earnings remain bleak compared to the North American industry and cloud services.
Amazon went out of China around 2019 after being pumped up by Alibaba Group Holding and other local depression. It cannot afford to lose in India, which has around 700 million people online – the largest number of any market economy. India’s e-commerce market stood at $ 41 billion in 2020, according to British research firm Euromonitor, going around five years.
The backlash against Amazon is stronger than other U.S. tech giants have faced. Facebook and Google have invested in units under the conglomerate businesses Reliance Industries, while Microsoft has partnered with Reliance in the cloud industry. While Amazon keeps stakes in local logistics partners, the tech group is fundamentally developing the Indian market on its own, which seems to be having a negative impact.
Immediately after announcing the move to Indian production, Reuters reported that Amazon appeared to have helped a small number of specialty merchants to reach an unequal sales volume on the Indian platform. The news sparked the All India Confederation of Traders, an industry group representing 80 million sellers, who petitioned the government to ban Amazon from operating in India.