Why Amazon failed to dominate Indian e-commerce market after 13 years of trying

A version of this article appeared on Bloomberg News.

Amazon entered the Indian market 13 years ago with a simple global expansion strategy. The company believed that heavy capital injections, robust logistics, and long-term patience could overwhelm local rivals and resolve political friction.

The strategy required losing money early to build scale and dominate later. While this model paid off for Amazon in nations like Japan, Germany, and the United Kingdom (UK), it has sputtered in India.

The Seattle-based firm now occupies an awkward middle ground in the world's most populous nation. It is too large to pivot quickly, but too constrained to match the agility of its domestic competitors.

A retail operation that once aimed to control the market has seen its edge eroded across several sectors. Local rivals now challenge Amazon in e-commerce, video streaming, payments, and the rapidly growing quick commerce sector.

The shift in the company's approach became visible under Chief Executive Officer (CEO) Andy Jassy, who took over from Jeff Bezos in 2021.

In June 2022, Amazon abruptly pulled out of a high-stakes auction for the media rights of the Indian Premier League (IPL) cricket tournament. The decision stunned industry onlookers, because the retail giant had been aggressively acquiring sports broadcasting rights globally.

Walking away from the cricket rights, which eventually cost Walt Disney Company and Reliance Industries $6.2 billion, signaled a new era. It made clear that the years of heavy spending and cash burn under the previous leadership were over.

Jassy has brought an unsentimental discipline to international operations. He chooses to cut or streamline projects that do not promise sufficient returns, while shifting corporate resources toward artificial intelligence (AI), satellite broadband, and microchips.

Current and former employees indicate that Amazon underestimated regulatory headwinds, let valuable acquisitions fall to competitors, and failed to adapt to local market complexities.

Under the strict foreign direct investment (FDI) rules enforced in New Delhi, foreign e-commerce companies cannot hold or control inventory. This restriction forced Amazon into a maze of complex local partnerships.

Regulatory compliance became more difficult in 2020 when the Competition Commission of India (CCI) launched an antitrust case. Regulators argued that third-party sellers on the platform were not truly independent.

Subsequent policy adjustments, including caps on total annual sales from a single vendor, further chipped away at the platform's economics.

Operational changes have also slowed down decision-making. While local executives operated with high autonomy under Bezos, the Indian business is now managed directly from the corporate headquarters in Seattle.

Some staff members support the current financial discipline, but others argue that remote management has caused the firm to miss critical consumer trends.

The rise of 10-minute delivery, known locally as quick commerce, has upended online shopping across major Indian cities. Amazon failed to build the necessary network of micro-fulfillment centers early enough to compete.

A lack of local quick-delivery facilities means orders that consumers expect within minutes often take hours to arrive. Consequently, market tests that used to launch in weeks now take quarters.

Before leaving his role, former country head Amit Agarwal proposed spinning off Amazon India as a locally listed entity to grant it the structural autonomy needed to navigate domestic laws. The proposal was rejected, and leadership lines became increasingly complicated.

Although the brand retains a trusted reputation and millions of loyal Prime subscribers, the internal consensus is that the firm has fallen behind. High-level requests for Jassy to visit the country and meet local teams have been declined, indicating a clear pivot away from the hyper-growth phase.