Long ago, there lived in a village two brothers — Motu and Patlu. Motu was the fat guy and Patlu was very lean and thin. One day both of them decided that they will start independent business in their village to sell mustard oil. Motu was smart guy and wanted to capture entire village. In order to do so, he started giving discounts on mustard oil. Patlu kept price at same level and focussed on the quality. Soon 90% of the market was captured by Motu and rest 10% was Patlu’s share.
Soon Motu realised that he was incurring losses, rather massive losses. Though revenue was going high, but losses were also mounting with equivalent speed. He took some loan ( investor’s money) and diversified his business into ground oil. At that time there were few players in the market, who were already selling ground oil. Motu applied his tactics, as he was quite confident of his discounted business model. He started giving discount on ground oil as well. The investors were happy, that he kept on capturing market. Some more investors joined hands with him and put more money and Motu kept on giving discounts. He captured 80% of ground oil market and incurring more losses.
Patlu, who had lost the first battle of mustard oil and few guys from ground oil had joined hands by that time. They had been searching for right time to screw Motu for unethical business practices. However, they could not do anything as Motu was “The Big Motu” by that time and out of reach from guys like Patlu. Motu had been arrogant to the producers, but he kept consumers happy. Producers had no choice, as Motu’s shop was selling more than any other shop out there.
While life was moving forward, ‘The Big Motu’ felt there was big need to introduce TV to village, as villagers were deprived of TV. That was indeed a great idea and few investors put large chunk of money to it. Motu came up with a subscription model, so that whoever saw TV, had to pay some amount of money to Motu. People were happy, but the Motu’s staff at ground oil and mustard oil business were terribly unhappy, as the focus on those business were not there. The staff were working too much. The initial high salary was marginalised over period of time.
So Motu kept on making customers happy, but at the cost of his own staff and producers of the product. He always believed that if one producer left his shop, dozen more would come and join. He was right, as everyone was dying to have Motu’s name associated with them.
Every dog has a day.
One day when Motu woke up from bed, he saw Patlu and few police men at his bed. Few of the unhappy producers were also besides him along with few local politician. Police had filed a case of unfair business practice and the charges were verified by few producers, staff even some customers who Motu felt were loyal customers. Motu tried to cease the case by paying some money, but probably he didn’t have enough money to pay the demand of politicians. The very next moment, investors started asking for money, staff revolted and things went very bad. The Big Motu was bankrupt.
This story is satire metaphor of how Amazon runs business worldwide and why Amazon would fail in India with unethical business practices.
India as a country is very different from the rest of the world. The consumers behave very differently here. Let me highlight few attributes of Indian.
Attribute :1 People from Asian origin and specifically Indians value for money. Brand loyalty always loses the battle when pitted against the monetary gains. The discounted model does not create loyal customers in India.
Attribute :2 Indians are very receptacle, adoptable to change and very fast in spreading the message. Thanks to mushrooming social media groups. So anytime Amazon tries to reduce the price of discounted items, it would take very little time, people switching to competitor. When Amazon entered India, there were few multi-million dollar e-commerce giants. Now there are many, with a hope that they would be taken over by Amazon some day. If at all Amazon buys few of them, the intrinsic value of the deal would be far below the sell off valuation.
Attribute :3 Political and ideological idiosyncrasies. In Indian it is always believed that if two persons don’t match in their political views, probably they won’t be good team player. The silent reader who has been reading until now, will definitely have eyebrows up by now. Politics play an important role in governing a lot of things in India. Unlike west and Europe, where business houses are aligned to multiple parties so that nothing goes wrong when opposition is in power, in India, business houses cannot function the same way. Common people in India barely change political ideologies. As a result, it has been witnessed again and again that big companies ruin once there is a change in power at centre or state. People don’t hesitate to do political vendetta crossing any limits. It won’t be surprising Amazon falls prey to this practices.
Attribute 4: Unlike other parts of the world, ego plays a vital role in shaping the personality of Indians. There are ample instances where dear ones are dejected just to satisfy ego, with hefty financial sacrifices.
Enough of attributes. Let us put some search light through corridors of Amazon’s functioning in India.
Manager : You are getting four course meal from five star hotel. Travel is taken care by company and you work in fortune 80 company with good salary. What else you require in life.
Me: I feel the company won’t survive more than 15 years with this model as the basics are not clear.
Manager: You have gone crazy, as no fortune 100 companies ever died in 15 years.
Rest all was history. EDS did some bad take overs, they were not having lots of savings and were not prepared for crisis and finally it was sold to HP. Eventually EDS helped HP, which was a fortune 30 company to incur losses and later divided into multiple parts.
Possible cases how Amazon can fail in India.
There are no substantial examples that any business house running for losses or lack of profit has been able to sustain in long run. Amazon has been without profit for almost since inception, but it was majorly operational in country like US, the country which gave world many economic bubble like dot.com, sub prime crisis etc, where a economy can sustain even debt to GDP ratio is close to 100%. But in changing economic scenario, that model does not hold good. The functioning of Amazon is nothing less than e-commerce version of sub-prime crises, where the company believes that after they capture the complete market they will raise the price. But that instances will never happen in India. The day it is tried, there will either be multiple new companies floated, or public outrage or government interference. All in all these possible cases Amazon would fail in India.