Retailing giant Amazon is setting up Lab126, its secretive consumer devices development arm, in Mumbai, as the company grows its portfolio of devices in India, its fastest growing market.

Lab126, the Bay Area, San Francisco-based outfit behind products like Kindle e-readers, Fire TV stick, Fire tablets and smart, wireless speaker Echo, has chosen Mumbai over competing Indian locations, two sources said.

“There was talk that it will be in Hyderabad but it looks like they’ve chosen Mumbai,” said an Amazon source, requesting anonymity because he is not authorised to speak with the press. Engineers at Lab126 will work on Amazon’s product lineup in India, which currently includes Kindle and Fire TV and the soon-to-launched Echo.

Mumbai is also where Amazon has its Indian data centres.

This will be the first time Lab126 sets up outside of the US. For an establishment that has over 3,000 employees, according to Linkedin, Lab126 has been extremely secretive about the projects it works on.

FactorDaily was not able to ascertain by when the Lab126 Mumbai centre would be up and ready. But, a source said, Amazon is already in the process of recruiting engineers for the Mumbai centre.

Amazon did not comment on a query from FactorDaily on the story.

Lab126, headquartered in Sunnyvale, California, has partner teams in Cupertino, Irvine, Seattle, Boston and Austin. Several of Amazon’s top hardware products have come out of experiments at the lab founded in 2004. Projects at the lab are experimental and some never hit the market. While Kindle was wildly successful, Amazon’s Fire phone was a failure. Various teams at Lab126 have even been working on machine learning techniques and artificial intelligence to help create fashion clothing.

“Amazon wants to have AI and ML in all its products. Globally they want to make large consumer appliances and other electronics – most or all of which will have AI built into it. Many of those will come here,” said a second source. “But India is a different kind of market, different kind of customers, usage patterns, and needs. It will be important for Amazon to understand the Indian market through a different lens using data analytics and intelligence.”

Why India?

India’s e-commerce market today is estimated to be about $15 billion. According to a January 2016 BCG-CII report (pdf), by 2020, India’s retail market will be over $1.1 trillion out of which e-commerce will be about $45-50 billion. That will still be only 5% of the country’s trillion dollar retail market — indicative of the headroom for growth in the years and decades ahead.

“The current consumer base is $50-60 billion. That’s 200 million population, 50-60 million households. But that’s not going to justify the investment. For the next phase of growth they will have to figure out local languages,” said Santanu Bhattacharya, who led mobile products for Facebook in emerging markets such as India and Brazil.

“If someone is thinking ahead of time, they’ll think about integrating Alexa with search. Then you have Indic keyboard search and voice search in local language,” Bhattacharya added.

It’s still early days for local language internet but the number of people using the internet in their native Indian language has been growing by multiples. Nine of 10 new internet users in India over the next five years are likely to be Indian language users, predicts a KPMG- Google report (pdf). Indian language internet users have grown from 42 million in 2011 to 234 million in 2016 and there are 175 million English internet users, the report says.

It isn’t just Amazon, other tech giants such as Google and Facebook are also betting big on localising their products for India. Besides launching products built on India’s payments stack, both companies have been adding local language capabilities to their product suite.

Also read: The Enigmatic Indian e-commerce consumer

Amazon’s ambitions in India are clearly big. The company, not only earmarked $5 billion to conquer the Indian online retail market but has also been surprised at the demand for products such as Kindle and Fire TV stick here. The Kindle and its variants were introduced in India in 2013; the Fire Stick in April this year. The Echo is expected to go on sale in India this Diwali.

In July last year, it launched Prime, a membership program which offers shoppers faster shipping and also Prime Video, that streams movies and television shows.

Also see: How Prime Video is turning the ecommerce wheel for Amazon

Amazon, is also making a big payments bet by launching Amazon Pay in India. An Amazon source told FactorDaily earlier that the company even has plans to take Amazon Pay to kirana shops in India. The company, which recently acquired a licence to operate a mobile wallet in India, will enable recharges, utility payments and online shopping.

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