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rP os t case W94C01 August 1, 2014 Revised November 7, 2019 op yo Amazon in Emerging Markets tC In the spring of 2014, Amazon.com, Inc. (“Amazon”), saw its chief competitor in China, Alibaba Group, file documents with the SEC for an initial public offering (IPO) that could be one of the largest in history. Meanwhile, its main competitor in Brazil, MercadoLibre, sustained an approximate 40% loss in stock price despite several years of profitability. On top of this, its two chief competitors in India, Flipkart and Snapdeal, formed separate mergers with other related firms. The intense battle for control of a country’s e-wallet was nothing new to Diego Piacentini, senior vice president of International Consumer Business, and Jeff Bezos, founder and CEO. In 2013, their decision to launch Amazon.in marked Amazon’s eleventh country-specific portal after nineteen years of operation. China was Amazon’s first emerging market website, and India only its third. Compared to its experience in China and Brazil, Amazon followed a different business model and strategy in India. What led to the differing approaches and which, if any, of Amazon’s emerging markets’ strategies and investments would succeed? The case starts by examining Amazon’s entry into India and then turns to Amazon’s experience in China and Brazil. Amazon’s International Expansion No Incorporated in 1994, Amazon had evolved from a small online vendor of books and other informationbased products in 1997, into a global “customer-centric” company serving consumers, sellers, and developers with operations in twenty-two countries. Amazon’s international expansion started in 1998 when it acquired Bookseller, Ltd. (bookseller.co.uk) in the United Kingdom and Telebook, Inc. (telebuch.de) in Germany. These two sites gave rise to what became Amazon.co.uk and Amazon.de, respectively. It was early in 2000, during this initial European expansion, that Amazon hired Piacentini, who had been Apple’s general manager for Europe. Since his hiring, Amazon launched nine other country-specific websites in Italy, France, Spain, Japan, China, Mexico, Brazil, Canada, and Australia. (See Appendix A for Amazon’s country-specific web pages.) In several other countries, from Costa Rica to South Africa to Australia, Amazon located customer service, software development, fulfillment, data centers, or back office operations. Do In 2013, Amazon’s Germany, UK, and Japan sites accounted for 85% of total international revenues of $30.0 billion. Overall, Amazon’s international markets (excluding its Canadian site) made up 40% of Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan. ©2014 Amy Nguyen-Chyung and Elliot Faulk. This case was written by Elliot Faulk and Amy Nguyen-Chyung (Assistant Professor of Strategy) of the Ross School of Business at the University of Michigan. It was created as a basis for class discussion, not to illustrate either the effective or ineffective handling of a business situation. Secondary research was performed to accurately portray information about the featured organization and to extrapolate the decision points presented in the case; however, company representatives were not involved in the creation of this case. This document is authorized for educator review use only by Sahel Alrousan, Other (University not listed) until Jan 2021. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860 Amazon in Emerging Markets W94C01 rP os t Amazon’s total revenues of $74.4 billion (see Appendix B1 for consolidated financial results). However, despite a growth of 14% in net sales between 2012 and 2013, Amazon’s international business had seen a period of declining rate of growth since 2011 (see Appendices B2 and B3 for a geographic breakout). Would this declining growth rate foreshadow what was to come for Amazon’s international markets, or be merely water under the bridge according to Bezos and Amazon’s “marathon” mind-set of emphasizing customer service and long-term gains in sacrifice of short-term profits? The Indian E-Commerce Market op yo On June 5, 2013, Amazon officially entered the Indian market with the launch of Amazon.in. Although the Indian government had liberalized its strict foreign direct investment (FDI) laws in September 2012, the resulting regulations still forbid foreign multi-brand retailers from having over 51% ownership.1 As a result, Amazon could not replicate its US business of selling its own products in addition to serving as a selling platform for third-party vendors. In India, Amazon would only be able to function as a pure marketplace that would connect domestic sellers to buyers in the market. For Amazon, these FDI considerations would be only the first hurdle encountered in the nascent but fast-growing Indian e-commerce market. According to World Bank data, as of 2013 India had approximately 189.1 million internet users (15.1% of the 1.25 billion population) compared with only 60.7 million (5% of the population) just four years earlier (see Appendix C for a list of Internet users per 100 population for select countries; see Appendix D for mobile cellular subscriptions).