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Amazon India gears up to launch digital payments service

LiveMint logoLiveMint 14-06-2017 Anirban Sen

Bengaluru: Amazon India indicated that it is witnessing rapid growth from its Amazon Prime membership programme amid a healthy increase in the number of new users from second and third-tier cities and towns, even as the e-commerce giant prepares to launch a new digital payments service soon in India after getting the go-ahead from the Reserve Bank of India to do so.

In an interview on Wednesday, Amazon India head Amit Agarwal said that spending from the existing base of paid Prime users has doubled since the beginning of the year. Mint had reported in April that Amazon’s Prime membership programme was driving 30% of all orders on its platform.

“One out of three units that are shipped by us are ordered by Prime customers—so, we’ve reached a point where we see a healthy loyalty that is allowing people to buy more and more. Just the Prime spend between January and May increased 100%—so our loyal base is buying more and we’re getting healthy customer inflow. If I look at the sale event in January versus May, it shows they’re shopping more,” said Agarwal, who was promoted to senior vice-president earlier this year.

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He added that 50% of orders shipped on Prime are being driven by buyers in tier-II and tier-III cities.

The latest growth figures from existing Prime users is significant, as it indicates that the volume of spending from existing e-commerce users—a key metric to track the health of the broader online retail market—is growing steadily and showing signs of bouncing back, after the online retail market barely grew in 2016.

Amazon India, which has now completed four years of operations in India, is also working on a new digital payments service, but Agarwal declined to share details on what form the service might finally take. Mint reported on 13 April that Amazon India had already received the RBI approval to launch its own digital wallet service in India.

Amazon India, which had applied for what is called a prepaid payment instrument (PPI) licence nearly a year ago, is soon expected to launch the new digital payments service that will be broader in scope than its Pay Balance service and will not be restricted to Amazon-based transactions.

“All these areas are very early in their life cycle...Our most important priority for our payment investments has been to improve the experience of customers on Amazon. In that sense, this licence allows us to provide a more cashless experience and a more convenient experience to our customers...this will allow us to move customers away from a cash-based or payment on delivery-based segment to a more prepaid digital segment. That’s our primary priority. Of course, we’ll try different experiments and see what happens,” said Agarwal.

He said that Amazon, which has committed to investing $5 billion to build its India business, will continue to invest heavily in key areas such as infrastructure and technology, as part of a broader strategy to expand the e-commerce market in India and tap the next 100 million users.

Currently, about 75% of Amazon India’s new customers come from lower-tier cities, while 65% of its active customers are new users, Agarwal said. Amazon India currently sells more than 100 million products and the company is adding nearly 100,000 products on its marketplace every day, he added.

“If I look at the last four years, almost half of our investments have been in infrastructure, which is a large amount. Infrastructure will continue to be one of our key investment areas,” said Agarwal, who has overseen Amazon’s rapid strides in India, which the e-commerce firm sees as arguably its most important international market after it lost out in China to Alibaba.

Amazon entered India in June 2013, years after Flipkart (2007) and another rival Snapdeal (2010) started out, but the American online retailer is running neck and neck with market leader Flipkart.

On 7 April, Mint reported that Amazon India posted an 85% increase in gross sales volume in the three months to March from the year-ago period, growing much faster than the overall market.

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