Amazon is shutting down its wholesale distribution business in India.
The American e-commerce giant announced Monday that it is ending Amazon Distribution, its wholesale e-commerce website accessible to small stores in Bengaluru, Mysore, and Hubli. A company spokesperson said-
“We don’t take these decisions lightly. We are discontinuing this program in a phased manner to take care of current customers and partners.”
Amazon Distribution is ending the service that kiranas, pharmacies, and department stores in India utilized to secure inventory from the e-commerce company. While an exact date wasn’t given, Amazon did say the discontinuation will happen soon. About its working, the Amazon Distribution website describes-
“We offer a wide range of products at competitive prices and the convenience of next-day delivery at your doorstep. As a member, you can purchase thousands of items for resale at any time of the day at competitive prices and in bulk quantities, pay via the various payment options available, get a GST bill for your order, and convenient and reliable door-step deliveries the next day.”
Amazon has not given a reason for why it is shutting down its wholesale distribution offering, but this follows the company’s decision to also shut down two other businesses in the country — food delivery and online learning platform Academy. This is part of Amazon’s global restructuring of its business.
Amazon plans to cut approximately 10,000 jobs in the next few months, according to media reports. The job cuts will affect several divisions of the company, including devices and services. Amazon has also begun shutting down some operations in India, which will result in additional job losses.
Amazon CEO Andy Jassy warned employees in a memo that the company plans to do more layoffs next year.
India is a crucial market for Amazon, but it is also one where the company falls behind its rivals who have more financial backing. According to a recent report by Sanford C. Bernstein, Amazon lags Walmart’s Flipkart in sales and is having difficulty gaining ground in smaller Indian cities and towns. The analysts said that between 2018 and 2021, Amazon’s gross merchandise value ranged from $18 billion to $20 billion – significantly lower than Flipkart’s reported GMV of $23 billion during that same time period.
Amazon isn’t the only game in town anymore. They face competition from billionaire Mukesh Ambani’s Reliance Retail, India’s largest retail chain that is now selling online more frequently. There are also social commerce startups like SoftBank-backed Meesho and Tiger Global-backed DealShare to worry about. According to Bernstein analysts, Amazon has offered “a weaker proposition in ‘new’ commerce” up until this point when compared to their competitors.
The e-commerce spending in India is expected to balloon to $130 billion by 2025, making it one of the world’s most lucrative growth markets. Amazon has been trying to capitalize on this opportunity through investments in local businesses and partnerships with brick-and-mortar stores.
Amazon tried to purchase Future Retail, which was once India’s second-largest retail chain; however, they were outsmarted by Ambani’s company.
At this time, Amazon has not announced if any other business lines in the country will be affected.
According to a source familiar with Amazon’s plans, the company intends to maintain its focus on its primary e-commerce offerings in India. Last week, as part of this commitment, Amazon launched its second AWS region in India and promised to invest $4.4 billion in its cloud operations there over the next ten years.
Whether Amazon will be able to recover from the closure of its wholesale business in India remains to be seen. But one thing is certain: The company’s future success in this key market depends on how it adapts and grows as competition increases.
It looks like Amazon’s foray into India won’t end here. It may be a bumpy road ahead, but Amazon will have to find a new way to compete in this rapidly-growing market.
Shivendra Tiwari is an Engineer and an MBA in Marketing. He is the Content head at Marketing91 and a thorough Online Marketing enthusiast. Shivendra loves to follow different brands and study their Business and Marketing tactics.