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Amazon is looking at Prime, its subscription-based loyalty programme, as a potential game changer in India. The company, which has been growing at a faster clip than rival Flipkart, will use Prime to augment growth in the fast emerging e-commerce market.
Customers in India have so far not built an allegiance with a particular e-commerce brand, given the deep discounting practices all players have indulged in. Amazon, by offering free one and two-day deliveries with its Prime service that launched earlier this week, hopes to change that.
“We are very excited about the Prime program. We think it'll enter into a new chapter in India,” said Brian T Olsavsky, Chief Financial Officer at Amazon. “We've seen great success in every country in the world that we've launched Prime, and we feel India is going to be no different.”
Amazon, which has been playing catchup with rival Flipkart in India, has recently committed to invest a further $3 billion into the country over the next few years. This investment is in addition to the $2 billion CEO Jeff Bezos had already committed in mid-2014 when rival Flipkart raised a massive $1 billion round.
In a conference call with investors on Friday, Olsavsky said that the company was very “encouraged” by what the company saw in India both in terms of customer as well as seller adoption. India is a more unique market for Amazon, where the company has been forced to adopt a marketplace model, the success of which the company has noted several times in the past.
Amazon has often credited its success in the country to its team. While the company brings years of experience in the e-commerce field, the unique situation in India has meant that there has been a lot of room for innovation. “Every time there's an obstacle or something that's different from the US, they’ll invent around it, whether it's a shipping method or a payment method or whatever,” added Olsavsky.
In the US, Prime subscriptions make up a big chunk of Amazon’s earnings, though the company does not list it as a separate entity in its financials. It is estimated that half of all households in the US have at least one member with a Prime subscription. Moreover, Prime customers spend an average of $1,200 per annum on Amazon, compared to $600 for a non-subscriber.
To add value and further justify charging Indian customers Rs 999 per year, Amazon is also bringing its video streaming service to the country. Similar to Netflix, the company says it will not only bring global content to India, but will also co-develop local content. Factor Daily, an online media company, had earlier reported that Amazon will sink $300 million into developing local content for India and was working with top Bollywood directors for the same.
