Madhav Chanchani, The Economic
New Delhi, 8 June 2016
founder & CEO Jeff Bezos said that the company is planning to
invest an additional $3 billion in its India operations, coming nearly
two years after the Seattle-based online retail giant announced plans
to pump in $2 billion. The announcement takes total investment
commitment in India by Amazon, which is competing with market leader
Flipkart for the top spot, to $5 billion.
The $5 billion
investment will take Amazon India past the combined capital raised by
both local rivals, Flipkart and Softbank-backed Snapdeal. While
Flipkart has raised over $3.2 billion till date, Snapdeal has mobilised
around $1.5 billion.
After losing out to Alibaba in China,
winning the Indian market has become critical for Amazon and the latest
move underlines that it has a blank cheque for the market.
have already created some 45,000 jobs in India and continue to see huge
potential in the Indian economy," said Bezos. "Our Amazon.in team is
surpassing even our most ambitious planned milestones, and I'm pleased
to announce today that we'll invest an additional $3 billion on top of
the $2 billion that we announced in 2014, bringing our total investment
in India to over $5 billion."
The announcement by Bezos was
made during Prime Minister Narendra Modi's visit to US. The PM also
presented Bezos with U.S.-India Business Council (USIBC) Global
Leadership Award along with Sun Pharmaceutical founder Dilip Shanghvi.
USIBC is a lobbying group for businesses in the two countries.
has been stepping up its investments in India since the start of 2015,
and has picked up momentum in the last two quarters, as ET reported
earlier this month.
The main India unit, Amazon Seller
Services, has received Rs 8,618 crore since beginning of 2015 and over
Rs 9,600 crore since it was set up. In March Amazon also made its
intention clear to keep pumping in more capital, as it filed to
increase its authorised capital from Rs 8,500 crore to Rs 16,000 crore.
Since Jeff Bezos made the announcement of investing $2 billion
in India in 2014, Amazon Seller Services has received Rs 9,029 crore.
Till the time of announcement in July 2014 the unit had received Rs 600
The infusion underlines how Amazon India is ramping up
its cash burn rate at a time when local rivals like market leader
Flipkart, and Snapdeal are conserving capital and focus more on unit
Last week, Amazon also completed its three year
anniversary in India, gaining market share from rivals who have been in
business much longer than it has. Flipkart which began by selling books
as an online retailer in 2007 and counts Tiger Global as its largest
investor, is the market leader in India's online retail industry.
reported in April that Amazon India has already overtaken Snapdeal in
terms of number of shipments, and is moving close to leader Flipkart's
The firm has implemented learning from the China market in India, Bezos said at the Code conference last week.
started India operations in June 2013 with cash on delivery, the
preferred mode of payment, and also leveraged local Kirana stores for
delivery of goods. It has also introduced a slew of initiatives for
merchants like AmazonTatkal, which enables small businesses to get
online in less than 60 minutes.
Amazon India has also built
its own logistics network in India, which includes 21 fulfillment
centers (FCs) owned by company and 50 owned by its sellers.
recent norms on foreign investments in online marketplaces are widely
expected to put a short term pause on Amazon India's aggressive gains
on market share on local rivals, even though many expect that it still
has a long term advantage both in technology and capital available.
guidelines expected to pause Amazon's advance include the cap of 25%
that a seller can account for sales on an online marketplace, and if a
marketplace can "directly or indirectly influence sale price of goods
or services." Both these factors were proving to be significant in
Amazon's advance in India.
Amazon Inc runs a joint venture
with NR Narayana Murthy's Catamaran Ventures- Cloudtail India Pvt Ltd-
which is one of the biggest sellers on the Amazon marketplace in India.
While Amazon has never directly acknowledged existence of this entity,
on January 29, 2016 it acknowledged it as one of the risks for the
first time to its international operations in regulatory disclosures in
"In India, the government restricts the ownership or
control of Indian companies by foreign entities involved in online
multi-brand retail trading activities........we hold an indirect
minority interest in an entity that is a third-party seller on the
www.amazon.in marketplace," said Amazon.com , Inc filing with
Securities & Exchange Commission (SEC) on January 29, two months
before Indian government unveiled FDI regulations on online
Amazon has also sought clarifications on how to
market discounts from the government after the recent regulations came
in force, as ET reported earlier.
Before the new regulations
were announced, Amazon's growth has outpaced both its rivals Flipkart
and Snapdeal. Amazon India's shipments in 2015 increased by 250% over
the prior year, while Snapdeal revealed that it has seen a growth in
its gross merchandise value of 90% between FY15 and FY16.
has not disclosed its GMV or growth numbers for 2016. The e-tailer was
targeting GMV of $10-12 billion (Rs 64,000-76,000 crore) by June 2016,
more than double the $4 billion it achieved in 2014-15 but is expected
to have widely missed the target.
But Amazon has continued
growth momentum in 2016, having increased 150% in the first calendar
quarter from a year earlier. It added 90,000 new products daily between
January and March. Now, Amazon India has 55 million products listed on
its platform while Flipkart has more than 40 million and Snapdeal has
Both Flipkart and Snapdeal have been on the
defensive mode in 2016 as they look to extend their runways and
monetise existing customers. There is also not much clarity on their
next round of financing after pitching to multiple investors since end
of 2015. And both these organisations are likely to see more challenges
going into the year.
the last 12-18 months, with funding tightening up, companies have
started looking at margin more seriously. Not only are marketing spends
are being refocussed, many senior management exits have happened and
more organisational turmoil is likely in the coming months," said
Devangshu Dutta, chief executive of retail consultancy Third
(Published in The