The worrying thing is they are succeeding
Last night, I was talking to a friend who was trying to persuade me to switch my online shopping back to the local offline merchants. He feels that if we don’t, we will end up helping the Amazons and Flipkarts, which are non-Indian business entities, to put more and more small Indian businesses out of business. Once that happens, these big businesses will become monopolies or duopolies and we will be at their mercy, be it in terms of price or choice or availability of things or whatever.
Oddly enough, I have been advocating a boycott of Amazon for the same reasons, as well as Amazon’s lack of ethics, which is another story. In fact, I have managed to avoid shopping online for long stretches of time. Sadly, to my own mortification, I eventually end up going back to the Amazon. There are two reasons why this keeps happening: convenience and price.
The Convenience Factor
The other day, my wife dropped her iPhone and shattered its protective tempered glass screen guard. Now, this isn’t expensive to replace, but it’s really inconvenient. I have to make an hour-long, hot and stressful expedition through clogged traffic to my city’s commercial zone, struggle to find parking, and finally locate a store that sells screen guards. Whereas on Amazon, it’s just a couple of clicks, and the screen guard will be delivered home in a couple of days. The battle was over even before it began. My orders from Amazon over the last year show me I mostly shop online when I need things of a specific dimension or meant for a specific purpose or available at a specific price.
The Price Factor
Despite my misgivings, I recently bought a smart TV from Amazon. If I had decided to buy the TV from local offline dealers, I would have had to buy a brand of TV that didn’t match my needs, and cost at least a couple of thousand bucks more. That was just a bit too much money for me to put where my mouth was. Here’s how Amazon persuaded me to shop with them.
With internet costs dropping in India and data becoming more available, smart TVs are finally becoming practical here. But I didn’t want to invest too much as technology is changing fast. Most tech things including TVs go obsolete in no time, and I didn’t want to end with a white elephant on my hands. So I had zeroed in on a 32″ smart TV from Xiaomi which had the right mix of features and price. Now Xiaomi has made a name for itself as India’s top-selling cellphone. Its strategy is to offer high-quality phones at affordable prices and make them only available via online channels (to cut out the middleman). So when Xiaomi offered a 32″ smart Android TV for the then unheard price of ₹15000 ($210), I was definitely interested.
This is where Amazon came in. They tied up with Xiaomi to be their exclusive partner for online sales of the latest 32″ and 49″ Mi TV models. Amazon took Xiaomi’s price-cutting strategy a step further, by again reducing the price. They did this by tying up with banks and their own payment wallet for additional discounts. I ended up getting that TV for around ₹13000 ($181).
Of course, big-ticket purchases like this don’t happen too often, with an IFB washing machine from Flipkart a year ago being my last such purchase. But even in that case, I noticed that the price on Flipkart was lower than the manufacturer’s own price. In fact, I observed that during the installation, the IFB guy desperately tries to push accessories like stands, filter, and detergent. I’m guessing IFB is doing its best to make the sale viable as its margins must be suffering due to the online shopping.
However, I know the Flipkarts and Amazons won’t sell stuff to me at a loss unless they stand to benefit in some way. I don’t know how exactly, though there are many theories floating around like this discussion on Quora. What I do know for sure is the losers in this transaction are the other TV manufacturers. I (and my family) have previously bought TV brands like Philips, Sony, and Samsung from local retailers. But the price difference is now so huge that I didn’t even bother to go check out those TVs. At ₹13000 ($181), I can afford to upgrade my TV every two years, whereas this thought would not even cross my mind with a Sony or Samsung bought from a local merchant at prices that are 2–3 times as much.
The problem is if a majority of Indians start thinking like me, those retailers are going to go out of business and close down, leaving the market to Amazon. At which point, Amazon would be in a position of power.
If not shopping, then what?
India is still a developing country, and most Indians have fixed or limited budgets for shopping. But corporates believe they must grow every year, and not doing so is equivalent to death, and Amazon is no exception. Personally speaking, my spends on Amazon haven’t really grown in the last few years. My guess is there are many more customers like me.
Now Amazon lives by data, and they would have noticed this trend. So they have started looking for other ways to increase my use of their services. In a way, it reminds me of the old days when Yahoo wanted to be a portal that would serve all my needs. The difference is where Yahoo failed miserably, Amazon is succeeding.
Video & Film
Take Amazon Prime. I initially signed up for the free delivery services. It was a bargain at just ₹500/year ($7) as I was buying a lot of low-value stuff from Amazon in its early days. However, once I realized it was affecting local merchants, I cut down on online shopping. And it didn’t make sense to renew the service last year. But Amazon persuaded me by sticking to the ₹500/year price tag and sweetening the deal by adding Amazon Prime Video for free.
Netflix costs ₹500/month ($7) for video and film content. But that’s as much in a month as Amazon charges in a whole year for the entire Amazon Prime package. I must add that Netflix does offer a lot more variety than Amazon Prime Video, which is a dealbreaker for binge watchers.
This year, Amazon Prime tightened its grip on me by adding Amazon Prime Music to the package. There is a catch though. I can’t use it as a single source for all my music because Amazon Prime Music does not have all my favorite songs. Its collection is limited to two million songs. This would not be an issue if Amazon allowed me to upload and store my own music online, but they stopped offering this service earlier this year.
Amazon has another music service, Amazon Music Unlimited. It offers tens of million songs for a price, but that service isn’t available in India. Spotify, which has a free tier, offers 30 million songs, and is rumored to be opening up in India but that hasn’t happened either. Apple Music is accessible in India and has 50 million songs, but costs ₹120/month ($1.67). I gave Apple a pass, as I prefer one time payments to subscription services as they tend to add up.
There were other factors that made me stick with Amazon Prime Music. One reason is music is just part of the Amazon Prime bundle. Secondly, I have set up Amazon’s own Echo smart speakers as my default music players at home. Apple Music is as of now, not allowed on the platform though I believe that’s changing as I type. Thirdly, Google Music has a free storage service, where I have uploaded around 10,000 songs. I can stream and listen to these any time I want, but unfortunately not through Amazon Music. Fourthly, I’m on the Jio mobile and have access to Jio Music, which is restricted to only those on the Jio network. Though the Jio Music app’s interface is clumsy, Jio has a vast collection. I find unexpected gems there that I don’t find elsewhere. Like yesterday, I had the urge to listen to Creedence Clearwater Revival’s ‘Have You Ever Seen The Rain.’ Amazon only had covers of the song, but Jio Music had the original (Creedence reappeared on Amazon the next day).
Since I’m talking music, I must add that I did not include Indian music in the discussion. That’s because the local Indian music apps like Gaana, Saavn, and Wynk have huge collections. They also have an option for a free, ad-based service, which is more than sufficient for me.
There are some problem areas. Like I can’t play Google Music on my Echo speakers. But this may not be an issue for long, in India, Alexa/Echo does allow me to choose between Amazon Music, Saavn and Gaana as the default music library for Alexa. So with Jio and Saavn merging, I assume I will be able to access Jio’s online collection within Amazon Music soon. Whether Jio Music will be free for long, and free of ads is an unasked question of mine that Jio seems to have answered (see below right).
Somewhere along the way, Amazon started offering Prime members in India a large selection of Kindle e-books to read for free. There’s a lot of good stuff in there for adults and kids.
I’m also using the Audible free trial to see if it’s worth signing up for the audio books service at ₹199/month (after the 3- month extended trial for Prime members). I get to listen to one book a month. And since I’ve always wanted to be a fly on the wall of the White House, I’m currently listening to Michelle Obama’s biography, recorded in her own voice. It would have cost me ₹888 ($12.52) if I were not on Prime.
Made by Amazon
With so much business happening on Amazon, it didn’t surprise me when Amazon decided to join the fun and make and sell products under its own brand name. I resisted buying those ‘Made by Amazon’ products for a year or so. But Amazon finally got me by aiming for my Achilles heel: they gave massive price cuts. So I ordered a 6-inch long lightning cable, aptly enough during a lightning sale, from Amazon (for ₹500 or $37). Sold under the Amazon Basics brand, the cable is Apple certified, and just the right size to carry with my portable charger.
A year later, I picked up an Echo speaker, and another one this year to make a home speaker network. I got them both during the Great Indian sale when price drops make the deals irresistible. The fact that Alexa is listening to everything we speak at home is a worry, no doubt. But, like the proverbial ostrich, I bury my head in the sand because of the incredible convenience of pulling up any song I want, just by asking Alexa.
Paying monthly bills is something that everyone does, and Amazon is trying to take its cut by offering me cashback for routing my payments through their wallet, Amazon Pay. The cashbacks are small amounts and can be used only for payments via Amazon pay but something is better than nothing. As of date, I have paid bills for my landline, mobile, internet cable, TV (DTH), and electricity. Besides if there are many bills, the cashbacks can add up to sizable savings every year.
I have also used my Amazon wallet to pay for bus trips and flight tickets. I got ₹1000 off on a ₹7000 flight ticket a couple of days ago, with half as an instant discount, and half as cashback to my Amazon Pay. Hard to pass that up.
This is a new service that I noticed Amazon advertising in its wallet via a tie-up with a new online-only insurance company called Acko. Anyway, a couple of days ago, my car’s insurance came up for renewal. The insurer said it would cost me ₹9600 ($137) or so. Out of curiosity, I went to the ad in my Amazon app, clicked on it, filled in a few details about my car, asked for a comparative quote and was surprised to see it was just half (₹5000 or $71) what my current insurer was asking. I did a bit of research online to confirm it was a good deal and see reviews on Acko. It seems Acko can afford to offer this deal and still make a profit because they are an online entity with minimal infrastructure and staff. In fact, it was I who had to do all the paperwork for the policy by typing in the details online, and if I wanted a physical copy of the insurance policy to carry in my car, I would have to print it out myself. It was a convincing argument and I signed up.
Similarity with India’s telecom price wars
While Amazon has been waging price wars in online shopping, an equally bruising price battle has been happening among the cellular network providers of India. Jio, a new entrant launched by the powerful Reliance Group, shook up the artificially high priced rates of cartelized incumbents with drastic price cuts.
Two years later, half the competition has shut shop, while the remaining ones have merged and consolidated leaving just three major players in the market. Airtel who was the largest player when Jio was launched, is now №2 behind the consolidated Vodafone-Idea group, with Jio being the third major player. Consumers have been the beneficiary of this price war. ₹300 used to get me 1Gb of 3G speed data, per month, with voice calls, messages and roaming fees all being extra, which would easily double the monthly bill. In fact, Indians used to save money by signaling via ‘missed calls.’ Now the same money will get you 1.5GB of 4G data every day (that’s not a typo), plus unlimited calls and messages to and from anywhere in India. Today, the ‘missed call’ phenomenon no longer exists.
Amazon’s price cuts have had a less obvious effect, but overall, customers have benefited. Like I wouldn’t have considered Acko for my car’s insurance and saved myself ₹5000 ($71) if it hadn’t been backed by Amazon.
When one door closes, another opens
Amazon’s discounts and expansion into other activities are beginning to affect the competition. Offline stores are often empty, and though they are fighting back with discounts, they have overheads like rents and will find it hard to match Amazon. Even other online stores are feeling the heat. eBay India was swallowed up by Flipkart, which itself was taken over by Walmart.
Let’s say the worst-case scenario of a majority of offline shops shutting down happens, and Amazon starts hiking prices massively. I believe that if that happens, the market forces will create alternatives. For example, I recently ordered a pack of three snap-on lenses for my phone from China, via Snapdeal, a competitor to Amazon. I didn’t really want the lens kit, but I just ordered it to test the service. The pros were prices were good, and quality and finish acceptable for that price. It cost just ₹250 for this 3-lens kit. The con was the delivery took two long months, as I was ordering directly from China, and it had to be literally shipped all the way to make the deal viable. Snapdeal has a returns policy with 100% refund, but I recall at some stage of the order seeing a disclaimer that this product was not eligible for returns.
My conclusion is that even if I quit Amazon altogether at some point in time, I will still be able to get things at reasonable prices if I’m willing to compromise on delivery time. As for the returns policy, I don’t see that no-returns disclaimer anymore so I guess Snapdeal found a solution.
I don’t know what the future holds but I can’t help recall that old saying about power. Will Amazon help me save as much as it’s doing now, once most of its competition shuts down? Amazon treatment of its employees doesn’t make me feel too optimistic. If you missed that news, read about it here and here. There’s even a movement going on to cancel your Amazon Prime account.
Wait and Watch
Considering the similarities, India’s cellular network industry could be a forerunner of what will happen in online shopping. As of now, mobile data prices are down, calls and messages are free, and there are lots of freebies. For instance, besides the free Jio Music service, Jio offers a free Jio TV app which allows me to watch live TV like NBA matches for free on my smart TV. Likewise, the free Jio Cinema app has a good collection of movies. The question is will Jio’s added services be free forever. When I figure out the answer to that, I will probably also be able to predict what Amazon will do.
With things being so uncertain with both Jio and Amazon, I think it makes sense not to cross any bridges till I reach them. If somewhere down the line, Jio Music is converted into a subscription service and priced at ₹120 (on par with Apple), I will most probably ditch Jio Music and stick with Amazon Prime Music. Alternatively, if Amazon Prime Music does the same, and Jio Music remains free, I will switch to Jio. Finally, if both services become paid, I will probably see where I can get the best deal amongst Amazon, Apple, and Jio. For instance, my kid uses Amazon Prime Music a lot, and if all three are priced at ₹120, I would get her Apple Music at a student discounted rate of 50% off. It all depends on the situation at that point in time.
Doing my two bits
I do my bit to support the local merchants by shopping offline wherever it’s practical. Like I buy all my provisions at the local supermarket. The price difference is not much and there are several positives. I get fresh locally grown food, and I don’t pollute the environment with Amazon’s packaging. I must admit it will be harder to do this if Amazon Pantry comes to my city. But for now, it hasn’t, so I lug my groceries home twice a week, and don’t feel guilty the way I do when an Amazon delivery guy buzzes me at my gate on a Sunday evening. I intend to continue shopping offline as much as possible unless the price difference is so large as to make it impractical to avoid online shopping.
My friend who was trying to persuade me to go completely off Amazon does not agree with the above. He believes the local merchants are under immense pressure to survive and need all the help they can get from each and every one of us, right now.
I admit to him it’s hard for me to give up thousands of rupees on principle. I know Amazon sees this as a honeymoon phase in India, and is using its money muscle to woo me with lots of mouthwatering goodies. It’s probably even losing good money on some of these offers.
The way I see it, I might as well as take whatever I can, while I can. Because once the competition is killed off, Amazon will probably squeeze the market for all it’s worth and extract whatever it gave away with interest.
However I tell my friend I admire his principled stand, and we cordially agree to disagree. As I’m about to bid him goodbye, I notice he’s on the Vodafone network, and a light goes off in my deal-seeking brain. My Amazon Prime is due to expire in a day or two, and Amazon is not offering me the 50% discount on the ₹1000 annual fee like it did the last two years. But Amazon wants new customers, and it’s tied up with Vodafone to offer the network’s postpaid users a free 1-year of Amazon Prime. I ask my friend if I can take up Amazon on that offer since he doesn’t plan to. He graciously agrees, unlocks his phone and hands it over. I go to the Vodafone app on his phone, locate the offer, apply for it, and soon get a request to sign on with my Amazon account to activate the one year trial of Amazon Prime. I sign in, and the deed is done.
All good things will come to an end, and I might as well enjoy it while I can.