Dear Sir,
India post and Amazon's new cash-on-delivery model
Amazon may be testing drones to drop off packages but in India, the world's biggest e commerce company is looking to try out something decidedly low-tech that could give it an unbeatable edge on deliveries and add reverse logistics capabilities for the cash on delivery model. Its secret weapon? The postman. Amazon already sends packages by India Post but now it wants to use the channel to collect payments from recipients as well, using the cash-on-delivery model. Amazon has started a pilot with India Post to test this system, which could help it reach deep into India's hinterland.
A partnership between India Post and Amazon would intensify competition in the still-nascent but burgeoning e commerce industry if the pilot proves to be a success.
Advantages
1. Amazon would gain reach deep into India's hinterland.
2. India Post would benefit from the company's aggressive growth plans.
India's 150-year-old postal service, which has more than 150,000 post offices in India, out of which 89% are in rural areas, hurting from the country's telecom revolution and increasing adoption of email, has been seeking to reinvent itself, including bidding for banking services. It has applied to RBI for a banking licence, seeking to leverage its wide reach.The Amazon plan, if it goes through, will fit in nicely with the postal department's plans. India Post aims to spend about Rs 100 crore in the next few years to set up warehouses for ecommerce packages.
Challenges to Cash on Delivery
Cash on delivery accounts for two-thirds of ecommerce transactions. The percentage is even higher in smaller towns. To be sure, cash on delivery is riddled with challenges in India. Customers sometimes refuse to accept delivery or aren't available at the address given to make payments. Theft and fraud risks are also higher.
Why India Post?
Amazon is testing the cash on-delivery model on India Post's Speed Post network, which is faster than the E-Express Parcel service it offers. India post will enable Amazon to reach its customers in the remotest parts of India and offer them a convenient, trustworthy and reliable shopping experience.
Amazon India functions as a market place for other vendors as existing foreign direct investment rules don't allow it to sell to Indian consumers directly. However, if and when the industry opens up, a wide distribution network would be an advantage over local rival Flipkart. India Post by far has the largest distribution network and no private courier company can match it.
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