For U.S. e-commerce companies, some of the most tantalizing expansion opportunities lie in India. Hong Kong-based investment bank CLSA forecasts that the country’s e-commerce market, now at $3.1 billion, will grow to $22 billion in the next five years. The problem for the likes of Amazon.com (AMZN) and EBay (EBAY)has been the Indian government’s strict rules barring companies backed by foreign money from warehousing their inventory on Indian soil—or selling it directly to the nation’s billion-plus consumers.
After several years of disappointing economic growth, the government is looking for ways to boost foreign investment. India’s Department of Industrial Policy and Promotion published a report earlier in January weighing whether it should relax regulations for online retailing and has asked e-commerce companies to register their opinions by Jan. 30. U.S.-owned companies are pushing hard to change the rules, says Amit Agarwal, Amazon India’s vice president and country manager.
U.S. companies have found a way to do business while they await the Indian government’s decision. They’re allowed to deliver and store goods on behalf of Indian merchants and are building local delivery and storage businesses and investing in e-commerce startups.
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Amazon established an Indian online marketplace in June where merchants can hawk their wares and pay the company fees to store and deliver their goods. More than 2,300 sellers have signed up, listing 440,000 products including books, electronics, diapers, and jewelry, says Agarwal. That’s more than Indian e-commerce pioneer Flipkart but far shy of market leader Snapdeal.com, which lists some 20,000 sellers and 4 million products. EBay led a $50 million round of funding for Snapdeal last year. “Ninety percent of the assortment we have is not comparable to any other e-commerce company in India,” says Snapdeal Chief Executive Officer Kunal Bahl. “That’s where we’ve driven growth.” Snapdeal says it expects to hit $1 billion in sales conducted on its website this year; Flipkart says it will do the same in 2015.
Amazon said on Jan. 20 that it plans to open a 150,000-square-foot warehouse in Bangalore, matching a facility it maintains in Mumbai, to speed deliveries. On Jan. 15, EBay India announced a nine-hour delivery guarantee for customers in Mumbai. EBay India…