Going Global: Lessons from Amazon
International expansion takes a lot more than just photocopying your current business process and hiring smart local talent. Global consumers are much more demanding than even five years ago – they expect lots of product choices, simple and intuitive payment methods, speedy delivery options and relevant recommendations. And we have one company to thank for all these new expectations — Amazon.
I‘ve been following Amazon’s foray into the international space with keen interest. Their stumbles in China are well documented. But the company has adopted a very novel approach to another emerging market – India. With just under 20% of the country having Internet access (compared to 86% in the US), Amazon realizes it will take a lot more than the obvious local language and region-specific marketing. It has to truly understand its new customers and their prefered way of doing business.
In India, Amazon is working very hard to turn its customers into subscribers, ensuring long-term commercial relationships and steady recurring revenue. Here’s how they’re doing it:
Lesson #1: Unlearn your established models and adapt to the ways of the customer.
The vast majority of Indians still prefers the old person-to-person sale, but Amazon has its foundations in the Internet. Not very feasible, you’d think. You’d be wrong.
Amazon has come up with a canny solution. The retail giant has partnered with thousands of small stores to serve as agents – in-store customers are shown the Amazon website and navigated through the various products. The store then places an order on their behalf. Telephone orders are another route.
By working with them, it’s already building relationships with customers. Who do you think will have crucial customer data and insights when the competition arrives? Go ahead and look at your own account history! Amazon knows the alpha through the omega – the first thing you bought with them, and the last.
Lesson #2: Accept payment in the local payment methods.
While being able to do business in the local currency is a no-brainer, businesses often underestimate the complexities of international payment methods. There are more than 200 ways of electronic payment methods alone. Customer preferences vary from country-to-country – China uses Alipay; Brazil buys with Boleto and SEPA is popular in some parts of Europe.
Only a small fraction of Indians have credit cards – perhaps the company’s dominant payment method in the US. So what does Amazon do? It learns to do transact with Indians the way they like it – in cash. The partner network of small stores also logically serve as payment and delivery centers.
Here’s the thing – With over 900 million mobile subscribers, mobile payments in india are predicted to hit $19 billion by 2019. Internet banking and debit cards are also growing rapidly, particularly in the urban sectors. Amazon is wisely investing in and building relationships with customers who are quickly moving to its preferred payment methods.
Lesson #3: Listen to Your Customers
In many emerging markets, the trick is for businesses to simultaneously learn about the region’s dominant ways and in-turn offer them a global experience. Amazon sells cow-dung in India. Yes, you read that right. Poop. Why? Because there is a market for it.
Cows are worshipped in the country and their dung is used in religious ceremonies. As cities grow bigger, the ability to easily source cowdung has become harder. Not anymore – now, it’s just a click away on Amazon.
The urban Indian wants access to her Kindle and Amazon Prime just like everyone else in the Subscription Economy. Kindle subscriptions are available and the company has plans to launch music and video subscriptions in India very soon. And there’s Kirana Now, the local version of Amazon Prime and Fresh for everyday products.
Lesson #4: Have Patience
It’s conventional wisdom to get into nascent markets early and often. But in India, Amazon has been relatively deliberate, in order to learn from the pitfalls and successes of its local competitors.
Indian retail companies such as Flipkart have more or less followed the US Amazon model. Amazon India however is venturing far deeper. To bring merchants on board, Amazon offers to photo-shoot their products, pickup and delivery services, and even help with tax filings. Where do you think their store will live as the country’s e-commerce market grows?
Amazon has the deep pockets and luxury of time to play it right with a long term view. It’s a company that knows how to turn customers into subscribers. There’s no reason smaller companies cannot do it with key category partners to reap the same benefits and successfully navigate today’s Subscription Economy.