Madhav Chanchani, The Economic
Bengaluru, 2 June 2016
has invested an additional Rs 1,350 crore (about $200 million) in its
India unit this year, stepping on the pedal as it seeks to accelerate
the momentum gained in the past 18 months.
The latest investment in Amazon Seller Services, disclosed in
regulatory filings on May 31, takes the total capital infused into the
main India unit since early 2015 to Rs 8,618 crore. The money came in
March, a few weeks before India introduced discounting and
vendor-related restrictions for online marketplaces.
The investment underscores Amazon India's determination to spare no
expenses to fuel growth, outspending rivals that are having to slash
budgets and focus on squeezing more revenue per customer. The money
will now also be needed for additional compliance-related expenses,
Amazon this week will complete three years in India, in which time it
has bitten off significant market share from domestic rivals who have
been around longer. The Seattle-headquartered company in March edged
past Soft-Bank-backed Snapdeal in shipments, or volume market share, ET
reported in April.
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.
For Amazon, after losing ground to Alibaba in China, winning in India,
the world's fastest-growing major economy, has become critical. The
company in October said it expected India to overtake Japan, Germany
and the United Kingdom to become its second-largest overseas market in
a few years.
"We have done much more local market customisation in India than we did
in China," Amazon chief executive Jeff Bezos said on Tuesday at the
Code/Media conference in California when asked what lessons the company
had learnt from China.
Amazon began its India operations by allowing buyers to pay by cash, a
novelty for it, and recently has leveraged neighbourhood stores for
delivery of goods.
It has introduced a slew of initiatives for merchants including
Amazon-Tatkal, so small businesses can get online in under 60 minutes.
Amazon India has also built its own logistics network, which includes
21 delivery or fulfillment centers owned by it and another 50 owned by
its sellers. But Bezos also said the Indian and Chinese markets are
different, taking a dig at investors who have ploughed sizeable capital
into Amazon's domestic competitors expecting similar successes as seen
"I think some of the investors in India in the early days thought that
India might be a replay of China and they have found out that it hasn't
gone that way," Bezos said at the conference.
Tiger Global and SoftBank have invested about $1billion each in
Flipkart and Snapdeal, respectively.
Experts tracking online retail said it wasn't alien for Amazon to
outspend rivals to dominate a market. Amazon in January made its
largest single capital infusion into in its India unit atRs 1,980
crore, a month after it sunk inRs 1,696 crore.
"This is only the tip of the iceberg," said Kartik Hosanagar, professor
at The Wharton School of the University of Pennsylvania. "While
Flipkart and Snapdeal are struggling to attract new capital, the
strategic commitment from Jeff Bezos gives Amazon India a huge
Amazon India, however, has to deal with the new guidelines that bar any
single merchant from accounting for more than 25% of the sales on an
online marketplace and disallow any discounting led by the online
policy has clear implications for Amazon's growth," said Devangshu
Dutta, CEO of retail consultancy Third Eyesight. "It cannot depend on
Cloudtail (Amazon's leading merchant) to develop its presence beyond
25% of projected revenues, so it does create a huge push for other
merchants and brands. This will need significant spending on more
manpower, more dispersed delivery infrastructure and higher marketing
spends as well. long-term horizon in India."
A spokeswoman for Amazon India said in an email, "We have witnessed
tremendous growth in three years of our operations in India. In 2015,
we grew by more than 250% (year-on-year, in terms of shipments) and by
over 150% y-o-y in the first quarter of 2016 despite a larger base."
For all this, however, Flipkart CEO Binny Bansal says he is not worried
by Amazon's pace.
"The more we make quality products affordable and available, that's the
only way to maintain our leadership," he said in an interview last week
when asked if Flipkart was confident about remaining the market leader
in 2017. "I am certain that we will remain the largest player by
(Published in The