Drones to postmen: Amazon-India Post deal set to shift e-commerce power balance

While Amazon is testing drone deliveries in the US, it is taking a low-tech approach in India.


While Amazon is testing dropping off packages in the US using drones, it is taking a low-tech approach in India. Amazon is reportedly testing collecting payments from receipts using the India Post channel, as well as implementing the cash-on-delivery (COD) method through the national postal service.

According to a report by The Economic Times, Amazon is already pilot-testing this system in association with India Post, which has the potential to help the US company spread its reach to the deepest parts of the country. A couple of people familiar with Amazon's plans have revealed that both the COD as well as receipt collection methods are included in the pilot.

The postman comes bearing goodies and not just bills anymore (Image credit: Reuters)

The postman might come bearing your Amazon goodies soon (Image credit: Reuters)

 

India Post currently has more than 150,000 post offices in India with an 89 percent concentration in rural areas. If this pilot works out successfully, Amazon has a great chance to stand on top of the e-commerce industry in India. The company already has a decent enough presence in urban areas, but so do most other players like Flipkart, Snapdeal and eBay. However, things get complicated when you want a delivery in a nondescript town or village in the interiors of India.

The new arrangement could work wonders not just for Amazon but for India Post too. Amazon gets access to a service that is widespread in India, but the postal service will get a new lease of life with the tie-up. With an e-commerce tie-up, India Post should ideally see a revival sooner rather than later. What’s more impressive is that the pilot programme is testing COD methods as well. "We are trying to add capabilities like cash on delivery and reverse logistics. Consumers don't want to make an upfront payment. We are developing software to start the cash-on-delivery service with Amazon," a senior India Post official told the paper. This eliminates the need for a credit or debit card, which are rarer in rural areas.

Of course, there are more than a couple of challenges facing both parties. One pertains to the COD method of payment itself. Every e-commerce company knows the risks involved: of customers refusing to pay up or not being available at the given address. With India Post being able to reach a far wider audience now, the risk only magnifies. Amazon will also have to prep itself to face a lot more claims of fraud, theft or damaged products. The other obstacle is training the humble postman to handle the different logistics of e-commerce deliveries. Collection of cash and handling of goods becomes crucial and something which Amazon cannot compromise on. So the company will have to spend capital to team up with India Post and train is employees for the same.

If this pilot does pass muster, e-commerce in India will be in a much better place. Amazon, despite the Foreign Direct Investment shackles, will have a massive edge over local rivals.


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