What if Amazon Enters Iran?

Now that the economic sanctions on Iran have been/are being lifted, everyone expects the giant international companies to step into this untapped market. Amazon the Seattle-based e-commerce website is one of the companies that everyone expects to see in Iran in the future.

Amazon is currently the 13th most valuable brand in the world but that doesn’t stop the e-commerce giant to grow its international presence year by year. According to Amazon’s 2014 annual report, the company has had customers from 185 countries who bought goods from merchants in 100 countries.

Currently Amazon has retail websites for United States, UK, Ireland, France, Canada, Germany, Italy, Spain, Netherlands, Australia, Brazil, Japan, China, India and Mexico. Although Amazon is working on the international level, it’s still considered an American company and the fact is that American corporates still can’t do direct business with Iran. There are many American brands that are operating in Iran but all of them are actually a European or a Middle Eastern branch of the mother company.

What many are misinterpreting is that they think Amazon has presence in every country that it’s shipping to, meaning that the company has warehouses and local offices in those countries. Not knowing that just because Amazon is shipping an item to a country it doesn’t mean that it’s actually operating in it.

How do Iranians make purchases on Amazon right now?

In the past couple of years, due to the absence of Amazon in Iran many individuals and companies started to seize the opportunity by becoming a middle man for the Iranians who were desperate to buy a rare item that they couldn’t find in the local market. Currently if an Iranian customer needs to buy something that is available on Amazon, he/she has to contact a middle man who can make the purchase. That middle man calculates the shipping price and its profit, makes the payment and receives the good in a neighboring country and then sends it to the customer living in Iran.

Since the customer has no other choice whatsoever, they’ll make the payment even though the final price would sometimes become two to three times the actual price listed on the website.

Competition is stimulating

Unconditional support of the government towards local startups does not always benefit them. Competition is stimulating especially when the rival is vigorous. Yes, supporting a local venture must be a priority especially in an emerging market like Iran, but this doesn’t mean that customers should be deprived off freedom of choice.

In today’s world monopolistic policies are no longer the answer to save the local companies. The government could prepare the infrastructure for the international companies such as Amazon to enter Iran and at the same time ease the conditions for the local companies. The government could make a revenue off the taxes from these companies and support the locals by lowering their taxes. This could result to a vibrant economy that’s both competitive and also open enough that everyone would be eager to take part of it.

Apart from that, the local competitors of Amazon in Iran already have a big leverage: a good understanding of the market. What Amazon (or any other international company) would try to do is replicate what has worked in other markets which they tried to enter. There are many other factors such as a clear understanding of the local culture and customer behavior that brings local competitors much ahead in the game.

A good example could be when Amazon entered the Indian market. In 2013 Amazon launched it Amazon India marketplace, but Amazon.in is still in a stiff competition with local competitors such as Flipkart.

What’s stopping Iranians from making purchases on Amazon?

1. Iranians still don’t have access to credit cards
2. Iran is not listed as one of the countries which Amazon ships to

All the Iranian e-commerce websites are currently using local online payment gateways. But sooner or later Iranians would have access to international payment methods. See the State of Online Payment and Transactions in Iran to gain a better perspective of Iran’s payment landscape.

There are also many international services such as DHL, TNT and Aramex which are operating inside Iran. Let alone the many local logistics service companies that are doing a great deal of job within Iran.

Pros of Amazon opening its services to Iranians

• The government could put an end to the black market and make revenue off the taxes and improve the infrastructure
• Partnership with local e-commerce websites such as Digikala, Bamilo and dozens of other online resellers could be made
• Local postal and logistics services could start working with Amazon and gain access to a bigger market
• More job opportunities would become available in the country
• Products made in Iran could become available on Amazon’s international website
• It could lead to a healthy competition between the e-commerce players in Iran and eventually lead to a better customer service among the rivals

Official presence of companies such as Amazon in Iran might not happen overnight, but it’s definitely something to consider. How do you see Iran’s post-sanction market for international competitors?