Transforming the way India buys and sells

Sudipta Ghosh: Hello everyone! Welcome to the next edition of Immersive Outlook. I’m very pleased to have my colleague Kunj joining me today, and we are going to have a fairly insightful discussion with Akhil Saxena. Akhil looks after customer fulfilment operations and worldwide customer services at Amazon. Given the fact that we are seeing so much disruption along with so much promise and growth, this promises to be a very exciting session for all of us. So with that I would like to begin the conversation. Akhil, first of all, thank you for joining us today. If you can tell us a little bit about your journey – particularly from the perspective of growth and some of the learnings and challenges in your journey so far – that would be great.

Akhil Saxena: First of all, thank you for the opportunity. I’ve been with Amazon for almost ten years now –almost from the time we started our operations in India. And I think our mission has always been to transform the way that India buys and sells. With that as the backdrop, I think a lot of the work that we have been doing is by keeping the customer at the centre of all conversations and then working backwards to invent and simplify for them.

So how do we look at the interests of the customer? Whether customers are people who sell on Amazon – the sellers – people who buy on Amazon – like you and me – or people who provide services to us, or who buy services from Amazon, I think the challenge has been a blessing in disguise because it’s an opportunity for us to grow rapidly – and growth is a good problem to have. I think the big piece for us was to build a very strong team with experience. E-commerce is still very nascent in the country, even after 10 to 15 years. Therefore, building a team of professionals who have a lot of exposure to e-commerce operations was the first big opportunity and learning for us: How do you scale [up] that team? How do you build that team?

The other piece I would say is the infrastructure, say when you want to fulfil the needs of different kinds of customers from different parts of the country, how do you build the infrastructure? The journey of infrastructure building has been very exciting for us. To build this infrastructure, you have to do it in a manner that you are able to predict what cube an inventory is going to occupy. So books would have a very different cube versus mattresses and sofa sets, and dining tables would be very different and so on. Therefore, storage systems would have to be built accordingly. So we build the supply chain in different segments. There’s a fresh supply chain, there’s a large and bulky supply chain, and then there’s a normal consumer business supply chain.

So once you’ve built those integral pieces and have this storage, how do you fulfil the orders? We need to keep finding ways to innovatively fulfil orders in a manner that can provide speed and reliability to our customers.
Hence, there are three elements for us to think about. One is a large selection and, therefore, storage spaces. The second is speedy and reliable delivery for our customers and, therefore, transportation and logistics. And the third is the convenience and security of buying online. I think those were the pieces that we worked our way through.

In logistics, I think we did a lot of work. When I promise that if you order in the next 2 hours and 15 minutes, I’ll give it to you tomorrow, we are already taking into account many things about where you are. Where is the inventory? What is the flight, train, bus or the truck that I can put the shipment on? Will you be at home when I come to you? Will you pick up the phone when you are in a meeting and I call you to say I’m going to deliver it? And the fact that it’s a promise for a definitive time. I think building those capabilities was the most exciting part of it. There has been a lot of learning, and a large part of the learning has been how you operate in a market which is predominantly cash on delivery.

How do you operate in a market where the address quality is not very great? You build pseudo addresses or address systems, and then say a cluster of buildings is an address in our systems. How do you now deliver to that address? And the piece is about ecosystems that can work with us. Therefore, how do we leverage the ecosystem in which we operate – whether it is the mom-and-pop kirana stores or the entrepreneurs of India who want to be a part of the growth story? I think those were some of the key challenges and opportunities that we encountered.

Sudipta Ghosh: Akhil, it was absolutely fascinating how you explained the complexities of the entire supply chain, particularly connecting buyers and sellers. And also the fact that you are actually promising to deliver a certain shipment to a certain customer within a specific time frame. We do a lot of research in terms of looking at the trends from a CEO perspective every year. According to our recent Annual Global CEO Survey, more than 50% of CEOs in India are actually very worried about the disruptions which are happening around them as well as the disruptions which are affecting them in their own organisations. Given the fact that you are juggling so many variables and the last mile is not getting simpler by the day, it would be great to hear some of your thoughts and experiences around how you are dealing with some of these disruptions, which have become more of a norm rather than an exception?

Akhil Saxena: Yeah, that’s a great question. I think these disruptions are here to stay. They’re not going away in a hurry for sure. The last two-and-a-half years of COVID-19 have taught us how disruptive things can get, and supply chains are being impacted by it globally. You look at any kind of supply chain – for example, right now, the supply chain in semiconductors is so significantly impacted that manufacturing everything from a small camera to a car to automation is getting impacted and delayed. So that’s not going away.
And I think the piece for us would always be B2C. How can our supply chains be more resilient, how can they be more agile, and are they providing us with an opportunity to invent and innovate? I think those are the three big questions, I would say. So from a resilience perspective, looking at our supply base and saying, ‘Where is that supply base? Is it close to the point of consumption? Is it close to the point of the customer, and is there an opportunity to either find alternatives and substitutes or move the supplier base closer in terms of stopping imports and being more self-reliant?’ I think that’s one big issue right there.

The second question is end-to-end visibility in supply chains which allows you to keep track of your shipment from point A to point B.’ But if you lose visibility of that shipment, you don’t know when you’re going to get it, and that adds to the anxiety and stresses the supply chain. Therefore, that end-to-end supply chain visibility is going to be a very important thing for anyone.

The third question is flexibility, right? How flexible are you? So how quickly can you change your manufacturing practices? How quickly can you change your formulations? If you are into manufacturing cosmetics….colour cosmetics products which have raw materials which are replaceable, then I think that flexibility comes in very quickly, and that’s going to be required.

Another question is, How do you become more self-reliant? Atmanirbhar Bharat is a great way to say how we do it ourselves, how we do it in a manner that we don’t depend too much on imports, but we could do it on our own. So I think we just have to embrace that.

Kunj Vaidya: I wanted to pick up from your first answer, when you talked about your vision to transform the way India buys and the way it sells. I think we should add the way India distributes as well. And picking from that and self-sustainability, you just launched your cargo airlines, and that’s a big move. What prompted that? And what are some of the big factors that you considered?

Akhil Saxena: I think we have been working with a lot of partners in the airline industry, and we’ll continue to partner with others as well. I think we saw the opportunity to serve our customers much better. Our primary customer base is growing in India. Customers are unrelentless. They want to get more and more and more in terms of speed – if it used to be two days, then it’s one day now. If it was one day earlier, it’s the same day now. And in the case of same day, they want things in an hour – and so on. So people want everything faster. And how do we give our customers a great shopping experience where speed and reliability both go hand in hand?

One of the things we realised is that by having our own network of operations in the air, we would be able to serve our customers and cut off ordering times to a later hour because we’ll have more flexibility on the routines and how the aircraft are routed. We saw this benefit in North America and Europe. We’ve been doing this since 2016. Now, we have almost 110 cities and 110 planes that we operate globally. So the benefit for us has been to partner with other people in the airline industry and take advantage of their experience and knowledge in running a plane, bring in our expertise on network design and customer cut-offs, and therefore have more visibility on the shipments.

The second thing is factoring in a delayed customer promise. This means you can order something later in the day so that you can get the shipment the next day. I’m not dependent on commercial carrier airlines which have a 5:00pm cut-off versus saying I can depart this at midnight and still it will be in Delhi at 4:00am in the morning.

Kunj Vaidya: So a little bit like vertical integration is what we see, and more and more of those areas that come within your control. That way, you have more visibility. And you mentioned that as part of disruptions as well. So what are some of the other large areas of investments that you are looking at three to five years from now?

Akhil Saxena: I think I would step back and say that the investments are all focused on the customer. What does the customer need, and is the customer, as I said, a seller or a buyer working backwards from that piece? The investments are likely to be in the area of technology. We build our own software, and we write our own code for solutions for our customers. So these investments would be to fulfil demand with speed and reliability, as I mentioned.

Kunj Vaidya: What about long-term management?

Akhil Saxena: I think investments are going to be more focused on what our customers want and how we serve those needs – whether they are sellers or buyers, or provide services to Amazon or take services from Amazon. So in my mind, we could segment these investments into different areas. One would be in terms of how to bring in technology which allows faster reliable delivery, a larger selection, visibility to customers, and a better way to browse the net and the shopping pages. This is being done across all e-commerce companies.
Similarly, for technology to fulfil orders faster, a good example would be to check how countries can bring in robotics. Do you bring in the full suite of robotic products, or do you bring in what is relevant to the country, what is affordable to the customers and what will work there? So I think automation is a big piece there. The second piece is infrastructure, where all this automation is likely to fit in – whether it is warehouses, and if so, what kind of warehouses should be built? Should they be small buildings in the heart of the city? Should there be large buildings outside the cities?

And therefore, the topology will depend upon what the customer needs. How quickly do you want to fulfil? Not everything has to be fulfilled in the next hour. Not everything can wait for 15 days, right? So you have to find the right way of serving customers. So there’s a lot more in terms of warehousing design. The e-commerce industry has allowed investments in the country to raise the bar on the warehousing grade.

The third piece of logistics, and this investment that we talked about, is also a great investment in helping the infrastructure of the country. It is strengthening the middle mile. It’s strengthening the backbone for our operations to move from point A to point B. And thus, any investment that we make in infrastructure is going to help the country. Therefore, investments over the next three to five years are going to basically serve as a boost for not just e-commerce but many other industries as well.

Within those, I would bring in internet of things (IoT) and analytics. Like, for example, for a fresh business, when you’re buying vegetables, we use vision systems to determine what is ripe and what is not. That’s one small example of how you could now start using different technologies. During COVID-19, when we had to do social distancing, we used a distance assistant. We built a technology based on vision to identify whether people were able to maintain the two-metre social distance that they were supposed to, and triggered an audio alarm with a red mark on the floor as a camera to say, ‘Hey, the distance is being compromised, so move apart.’ That’s the future of many of these pieces here.

Kunj Vaidya: One element that I picked from this is the multiplier effect. This is not only for you but how it will strengthen the country’s infrastructure, which we have seen over the last ten years of your presence in India. This has propelled so many new areas – new companies, new industries and the whole ecosystem.

Akhil Saxena: Absolutely! And you should see the ancillary industry development that’s happening. So, for example, when we have a warehouse in a place, there’s a bus to bring people to work. That’s an advantage for people who want to bring in a transportation service. It provides a fillip to the trucking industry in that area. There are people who come in and do operations in security, housekeeping, gardening, etc. There’s a network of suppliers who are now going to get us the packaging material that we need. I can’t move from Delhi to Chennai. It won’t make sense. So I will build a corrugated manufacturer base around Chennai so that I can supply it locally. And that is a virtuous cycle of positivity.

Sudipta Ghosh: You have been a digital-first and AI-first organisation. What will be some of the specific things which you think have brought in differentiation – like giving an estimate of when something is going to be shipped or reliably connecting the physical flow of the supply chain with the information flow of the supply chain? It would be great to hear some of your perspectives on what you think has been very successful and also about some of the new things that are going to come up.

Akhil Saxena: I would think about data being the first piece – that is to say, how do you use all the data that is available to you, and how you use that to serve customers more efficiently. And if data is available but is not connected together, it’s hard to make much out of it. Therefore, how do you have seamless data which flows through different parts of the supply chain to provide end-to-end visibility? I think that’s a piece that many companies are now working on and have succeeded in ensuring an end-to-end visibility into.

The second piece is in terms of how automation comes into play, which allows us to automate tasks which are repetitive and can be done with machines. And then, the human intelligence which goes behind writing the code and managing those machines. So I think the piece about how you handle stuff inside a warehouse is another area where future development is likely to happen.
The third piece is logistics. We talked about airlines. We talked about how it is an important part of the middle mile for us and why it is good for the country. But we have been working with the railways since 2019, to say how do we use some of the passenger trains, which are high-speed express trains, to go and move from point A to point B? So by using a Shatabdi train, how do I move from Delhi to Chandigarh by 11:00am? And that’s a four- to five-hour journey. But using trains and the railways is a great example of how we are now partnering with the ecosystem. I think some of those partnerships are also going to become very visible and very powerful because we connect a physically existing infrastructure with what the future holds for us or what the future needs for us are. The other piece is about using artificial intelligence (AI) to enable a small seller who’s making bamboo handicrafts in Assam sell his products across the country. How do we enable that person, that seller, to be tech savvy so that they can still put up a picture of their product and sell it on Amazon? I think some of those would be great enablers for the business there.

Kunj Vaidya: I can see alliances playing a big factor here, right? Just collaborating with so many stakeholders.

Akhil Saxena: ‘No one is good at everything’ is one of the things that I learned very early in my life. And we have to find the people that we can partner with and play with their strengths and play together. I’ll give you an example. In India, the address quality is very poor. So you might see in a remote city saying, ‘My house is a blue house behind the signal next to the bank.’ That’s the address. That's exactly the address that gets printed on the shipping label. And I might not be able to find my address based on geo codes and latitudes and longitudes. But there is a local kirana store who’s delivering to the house of this person every single day. They’re bringing the milk and bread and sugar every single day. Therefore, even though I’m not good at finding an address in that place, that person is really good. That person knows when the customer is going to be home because the customer works. And when they’re buying from the store, they also have some kind of credit.

So this shopkeeper or the mom-and-pop store has credit reliability. Customers trust them. They know when the customer is going to be available, and they know where the customer lives. So for me, when I have an address issue, I want to go and leverage the power of this mom-and-pop store. That is why we innovated and built India’s first programme called ‘I Have Space’, where a mom-and-pop store can actually deliver packages on behalf of Amazon with no investment. This is an extra income for them. So it’s a win-win for us. I find somebody who knows how to deliver in that area and this kirana store or the mom-and-pop store can make more money without any additional investment.

Kunj Vaidya: It’s another example of the multiplier effect.

Akhil Saxena: Multiplier effect, and you are contributing to the economy. And that allows us to win together. I think this the kind of partnership that is scaling up rapidly. We do this in almost 400 cities now.

Sudipta Ghosh: And when we are talking about these partnerships, what we are also seeing is that there is an increased focus from a sustainability perspective, and it is also getting measured and tracked and even rewarded in many cases in the external world. How do you see the focus on sustainability panning out going forward?

Akhil Saxena: I would say sustainability is the right thing. It’s the right thing for our planet, our customers and the country. So I would not take that as a constraint, but I would instead ask, How do you use this as an opportunity to invent and innovate?

So Amazon has been one of the first signatories to the climate pledge, which basically said that we should look at zero carbon emissions by 2040, ahead of the Paris Accord, which said 2050. We have been working on this in many spaces. So one area is about electric mobility, and I’ll talk about India for a minute to say in 2020, we made a commitment to have 10,000 electric vehicles (EVs) as part of the delivery fleet by 2025. We are well on track on that flight path, and we will meet that goal. This was over and above the commitment of 100,000 EVs that Amazon made globally. So this India piece was separate and, on top of that, similar. So we have worked with many players in the market. You would have seen some of the announcements being made to see how we are partnering with people who can provide us. It could be two-wheelers, and it could be three-wheelers. We look here at four-wheelers, and we are finding out whether it is from point A to point B within the city, or if it can be from city A to city B because long distances have a much larger payload as well.

The other piece that I would say is solar, and we have worked very extensively on both onsite solar and offsite solar. Most of our warehouses now have a solar panel on top – wherever space permits – or we go for offsite solar as well. Water is an important thing for us. All our new buildings have been designed over the last seven or eight years to have water-harvesting systems to say that, look, water is precious for countries like India or the Middle East, and therefore we need to design our buildings in the right manner from day one. Energy efficiency, et cetera, is common practice, so I will not talk about it. But packaging is another area where a lot of our customers have provided us with feedback, and that’s something that we have been continuously working on and will continue to work on. You would have a suite of boxes and packaging material where you would try to fit all of them and optimise space. So we use a lot of machine learning (ML) and data analytics to constantly keep looking at optimising the size of the box.

Imagine if you were trying to ship out a mobile ten years ago – the mobile phones were smaller, and you made a box, and you designed a box saying, ‘Oh, ten different varieties of mobiles will fit in that box.’ But with the different sizes of phones coming now, those boxes are relevant. So somewhere, if you don’t use data analytics to come in and say the box sizes have to change to now accommodate a larger screen size and the 12- or 14-inch tablets, how do you build the box suite differently? You do it based on what is available as data, what the customers are buying, and you try to optimise the same. So what we have been focusing on is working with AI and ML to identify how you constantly keep looking at the box wheels.

Similarly, with the elimination of single-use plastic in the middle of COVID-19, we eliminated single-use plastic in all our operations. It was hard because you have plastic in so many places when you do packaging, but now, today, we’ve already done that part of it. You look at the amount of recycling that we have in packaging material. In India, for example, all our vendors are expected to bring in 100% recycled corrugated material. So our corrugated boxes are made from 100% recycled material. So there’s a lot of work that we are doing in the packaging space. Single-use elimination packaging material, reducing the size of shipments, etc. And some of you have actually got shipments. We just have your name and the eco-friendly label saying, ‘This has no external packaging.’ And that’s an opportunity where we are working with vendors or manufacturers to say – you already have a corrugated box that is protecting the inner product. If you could just make it a little bit more efficient in terms of transport worthiness, then I don’t need to put another box around the box. And that’s the partnership that we have with many vendors, to say how we can design e-commerce-ready packaging so that you don’t need to overpack it again. I think there’s a lot of opportunity in this space, so it’s also an exciting space to work in.

Sudipta Ghosh: I quite agree with you that this is an opportunity to not just look at from a compliance perspective but actually to differentiate in terms of how you move closer to your customers and how you can be more responsive – socially responsive – that is. And customers are actually going to appreciate that. They may not mind paying an extra rupee or two because they are probably thinking that it is being done for a good cause because you are doing it for the sake of the environment.

Kunj Vaidya: In every single operation, every single aspect of your business, there is so much interaction with external factors. And if we were to bring in one of the largest external stakeholders beyond your customers and vendors, it is the Government. What are some of the areas where you believe it would be good to see some of the investments amplified from the Government’s side in order to really help further shape the evolving nature of e-commerce or commerce itself?

Akhil Saxena: I think when I talk about transforming the way India buys and sells, we can’t do it ourselves. We have to build these partnerships. And the Central and state governments of India have been very helpful and conducive for us to run our operations. If you look at the National Logistics Policy (NLP) and GatiShakti initiative, they’re both so important for this industry – whether it’s manufacturing or e-commerce – because they build the logistics infrastructure, allowing it to scale up as a global network. The piece about execution is one that we continue to work on. If you look at the two policies, NLP and GatiShakti, one is about creating infrastructure, and the other one is changing our systems and policies, right? Similarly, this whole piece of unified visibility of transportation and data is a great place where literally, I think, seven ministries and 100 apps are all coming together in a one-operation platform so that there’s end-to-end visibility.

All of these are great initiatives, and I think they will empower not just the e-commerce industry but also manufacturing and any other kind of industry in India. So I would say the partnership is strong, which is why I said we also work with India Post. They were the first carrier we used in the beginning.

We work with the Indian Railways, and we work with warehousing corporations in terms of warehousing and stuff like that. So there are a lot of partnerships that we have built. And I think the Government is also changing its policies based on what we need. So, for example, women in night shift operations in a warehouse weren’t very common. Today, we have many state governments who have now changed their policies to bring in women in night shift operations in a warehouse. They were okay to do it in customer service operations, etc. But in warehousing operations, that’s a new thing that the Government and many state governments have introduced. Similarly, governments have changed their policy to say, ‘What can we do with transportation? What can you transport?’ Railways have now worked with us together to say, ‘How do you have cargo on a passenger train?’ Like Shatabdi. Shatabdi was used to move people from point A to point B very quickly. But they changed the policy to allow e-commerce. So I think the partnership is great. We are working together. There’s a lot more to achieve together, which is what makes the future so exciting.

It’s a question of partnerships – of winning. It’s a question of us being able to explain the requirement and benefits. And the Government has been very progressive and supportive. That’s the reason we have been scaling up. It’s not easy unless you have the support of the Government.

Kunj Vaidya: Excellent. Very nice to hear, and very heartening to see such progress.

Akhil Saxena: Thank you very much for the opportunity.