ISBInsight: One of the JAMS conference themes was local-global intersections in marketing. What kind of policy enablers and roadblocks have you experienced in launching Amazon Grocery in India after the government opened up 100% foreign direct investment (FDI) in the sector in 2016?
Sameer Khetarpal: I think from a transaction volume perspective, grocery accounts for about 60-70% of volume. It is lower on value because the price on the unit is lower. But the government’s opening up of this sector was a very big change. This policy has a positive effect on consumers and a far-reaching effect on farmers. Now, it is also incumbent upon the companies to build that infrastructure. Any infrastructure building takes time. Building physical warehouses and cold supply chains that link directly to the farmers from whom you are sourcing takes time. You need volume. It is a journey. The government has first been gracious in opening up this sector to investment. But it has also been careful about setting limits. We don’t suddenly want an influx of foreign goods usurping Indian manufacturers of say, towels, bed sheets and cushion covers. So, it is important to be very thoughtful about it.
In what way has Dr Reddy’s been able to realise the framework you suggested during your plenary address – launch a new idea and test it out in a growth market and replicate that model elsewhere?
Raja MVSMA: At Dr Reddy’s, we ask: how can you take healthcare to the next level so that you can look at preventing rather than curing things? In India, doctors’ and consumers’ behaviour is much more advanced compared to many of the emerging markets or growth markets. For example, if you simply compare India and Russia, doctors started prescribing combination drugs in India almost 15 years ago. Whether you are talking about hypertension or diabetes, they opt for convenience for the patient, so that the adherence becomes stronger. However, in countries like Russia and in many of the emerging markets, that practice is slowly coming into use now. So, there is a gap of more than a decade. We have a lot of learning to do in the Indian market. If we can use this learning, we can actually make a big difference to the healthcare in emerging markets.
In your experience, how have consumers or government and regulatory agencies reacted to such innovation?
Raja MVSMA: If you are talking about a general consumer– whether in India or in emerging markets– health takes the backseat, most of the time. That is the fundamental problem we are facing.
With the help of the digital revolution, we can think beyond the pill, so that the pill burden comes down over a period of time. For example, if you can manage diabetes with the right kind of ecosystem, you can survive at least 20 years with the minimum dosage of Metformin 500.
The problem is that people do not take the pill the way they are supposed to. Along with the pill, you require exercise, diet, and other things to stay healthy. If you can provide the ecosystem, these kinds of lifestyle changes can fundamentally help a product. So that is the biggest challenge that we are confronting on the consumer front.
On the other side, there are a lot of changes in regulation, right from registration to managing the factory in the back-end. So, we as a company, need to invest a lot in order to keep up the pace.
What are some lessons that Amazon India can teach Amazon worldwide?
Sameer Khetarpal: What can we take from India? There are a host of things. First, our order economics and unit economics are far tougher here than in the United States. If we can make money in India, the US operation definitely will be profitable. So, I think innovating for the Indian supply chain is the first thing.
Second is the concept of crowd-sourcing when it comes to warehousing. Why can the local kirana shop not become the last-mile warehouse? Could our delivery van deliver there so the customer can pick up while going home? Such a practice would save on costs and monetise and utilise the asset. It would make the human more productive.
Third, the Amazon India app is the lightest app in terms of how many bytes it consumes. So even where the network is patchy, you can use it. Again, this technology can be applied across emerging markets, where the networks do not work in many places.
We started off as a company selling books, so we assumed that our consumers are voracious readers and like reading and looking inside books. In India, we had to innovate on the other end of the spectrum, where consumers buy on the basis of images.
The final piece is innovation on customer acquisition. In India, customers do not use search. So, for India, the customer experience must include more images. It must include more one-click shopping. It needs to be more assisted shopping. We started off as a company selling books, so we assumed that our consumers are voracious readers and like reading and looking inside a book. We built a lot of features for that kind of consumer. In India, we had to innovate on the other end of the spectrum, where consumers buy on the basis of images. Yet they must have the same level of trust.
There is much discussion in marketing around innovation, customer engagement, and of course, about digital marketing. If you were to pick out one area where you would like to see cutting-edge academic research, what would that be and why?
Raja MVSMA: If I have to pick one subject where we need to focus, it would be consumer behaviour. Over the last 20 years, the way consumers behave has evolved with changing technologies. So, we need to understand this technology-driven consumer behaviour. There is a lot of data available about what consumers are doing but not how their behaviours are changing. We need to convert the data into analysis of consumer response and interaction. This will help bring out insights for marketing. I would like to see efforts at mapping data onto human behaviour studies, to get more insights to organisations so they can get consumer the goods they want.
We need to look beyond the 100 million customers who can speak English. How does Amazon increase access to consumers who do not fall within this demographic in India? What are their needs? How do you communicate with them? How do you generate trust?
Sameer Khetarpal: I completely agree with this thought. Consumer behaviour and consumer insights are a big part of future marketing research. We need to look beyond the 100 million customers who are fairly evolved. These consumers know how to shop and they can speak English. They are well versed with what is happening outside. How does Amazon increase access to consumers who do not fall within this demographic in India? What are their needs? How do you communicate with them? How do you generate trust? How do you reach somebody who has not shopped online ever? These consumers may be paying more for their loans and for the products that they buy, while missing out completely on more affordable and more convenient consumer propositions. Most importantly, how do we make this leap as a company that grew up in Seattle and is going into the hinterlands of India? That is where I think we need to bridge the gap.
Thank you for talking to ISBInsight.