The India program is quite lucrative for Amazon’s bottom line. A merchant who chooses the full array of Amazon services, including buying advertising and contracting with the company to store and deliver the products from Amazon’s American warehouses, typically hands over about one-third of the item’s sale price in fees and commissions.
These third-party sellers are crucial to Amazon’s business, said Aaron Cheris, head of the Americas retail practice at Bain, a global management consulting firm. “They make more money on their third-party stuff than on the stuff they sell themselves,” he said in a phone interview. Amazon says that more than half of the units sold on its shopping sites come from such outside sellers.
To attract customers on a crowded site like Amazon.com, it helps to have a niche. For Krishna Murari, the founder of Rajlinen, that niche is luxury cotton bedsheets for the odd-size beds in recreational vehicles.
“I have never seen an R.V.,” said Mr. Murari, a former electronics engineer. But he learned about the specialty sheets from an American company that sells custom mattresses, and then studied images of camper mattresses. Now his factory in Indore, in central India, sells more than 10,000 R.V. bed sets per year in the United States, many of them custom sewn.
Mr. Murari said buyers have little interest in camper sheets until June or July, so for the holidays, he is focusing on high thread-count percale sheets for regular beds. Mr. Murari often imitates designs sold by big American retailers, but tried to undercut them on price, selling his versions for about $30 a set, slightly below Target’s prices and less than half of Bed Bath & Beyond’s prices for similar items.
At the start of the holiday shopping season, Rajlinen had about 42,000 sheet sets sitting in Amazon warehouses across the United States, waiting for orders to come in. Mr. Murari said his profit margin was low and he did not intend to offer big discounts over the weekend or on Cyber Monday, unlike many American retailers. His primary goal was to bring in enough revenue to keep his 115 workers employed.
While Amazon.com has sellers hailing from many countries, Mr. Cheris said that India and China are the two most important places for Amazon to recruit new merchants, since both nations are sources of cheap manufactured goods.
Unlike China, where local companies dominate e-commerce, India is also a huge domestic market for Amazon. Although most of India’s commerce is conducted offline, Indians are coming onto the internet at a rapid clip through their smartphones. Amazon’s chief executive, Jeff Bezos, views India and its 1.3 billion residents as vital to his company’s future, and he has vowed to spend at least $5 billion building up his India operations.
Flipkart, the top e-commerce site in India by volume, has pushed the central government to pass policies to protect local internet companies from unfair competition by foreign companies willing to lose lots of money. By promoting Indian exports, a top priority of Prime Minister Narendra Modi, Amazon is positioning itself as a good corporate citizen.
The Indian merchants selling on Amazon.com find their local site, Amazon.in, to be a less appealing marketplace. With a per-capita income of $1,600 a year, most Indians are unwilling to pay anything close to the prices that sellers can command in the United States.
Raja Rajan, head of Boston Creative Company in Coimbatore in south India, has done well selling $13 engraved spoons and $60 folded book art on Amazon.com. He recently began selling the spoons on Amazon’s Indian site, too. In the first six days, Mr. Rajan said in a phone interview, he did not have even one sale.
Perhaps that was because Indians know how cheap such spoons are to produce. Mr. Rajan said his profit margin is about $8 a spoon — rich enough to allow him to slash prices on Black Friday and Cyber Monday and see what happens.
“We are going to cut the price in half,” he said. “I just want to try it.”