Despite losses, Amazon to plough money into India

Mumbai, January 31:
Global e-commerce giant Amazon Inc has clearly disappointed investors after posting staggering losses in the last quarter of 2015. However, this is not deterring the company from focusing on the international market with India as a top priority.

Despite-losses-Amazon-to-plBrian Olsavsky, Chief Financial Officer at the Seattle-based firm, quoting comScore data at an investor conference call last week, said India remains a very important market for Amazon, with its arm topping all other e-commerce sites in the Indian market during the quarter, led by the festival season. “This was a very important quarter for us in India and the sales during the fourth quarter were greater than all in 2014 combined,” Olsavsky said, adding that the company is committed to ramp up its investments in the Indian market.

He also said the investments in the international market (outside North America) have been two-fold in the holiday quarter, with India getting the biggest chunk. This has also resulted in a 22 per cent growth in the sales originating from the market year-on-year. The growth was driven mainly by two businesses — Prime and Fulfilment by Amazon.

While Amazon does not give out numbers for different geographies, according to public documents available with the Registrar of Companies, Amazon India has reported a six-fold jump in sales at ?1,022 crore for the year ending March 2015. The financials from April till December 2015 have not been filed, but is likely to be more than double. In 2014, the sales stood at ?169 crore.

The company also has been paring losses in the Indian market at ?1,723.6 crore for the year ended March 31, 2015, against ?325 crore the previous year.

Despite that, the company is upbeat on India as it continues to expand its fulfilment centres and logistics, and spends heavily on customer acquisition by means of discounts and advertising.
According to a recent report on e-tailing by Kotak Institutional Equities, Flipkart, Amazon and Snapdeal together incurred losses of over ?5,000 crore in FY2015. With competition to acquire market and mind share intensifying in FY2016, it is expected that these losses will continue to increase, at least in the current financial year.
The report further said that despite the losses, these companies continue to invest in creating infrastructure (warehouses, fulfilment centres, data analytics capabilities, etc), and competition outside the big three (in the form of Paytm, ShopClues and several niche verticals) also remains fierce. While Flipkart has over ?4,200 crore of cash reserves, Amazon has also announced that it will invest $7 billion in the Indian market over the next five years to acquire more customers as well as sellers.

The Kotak report further adds that with competition for sellers increasing along with entry of retail giants such as Reliance Retail, which claims to be launching operations with 30,000 sellers (15 per cent of an estimated 2 lakh sellers on Indian marketplaces currently), the incumbent marketplaces have launched several initiatives to aid sellers by providing working capital loans, easy cataloguing services and standardised shipping rates.
courtesy:Business Line

Filed in: Retail /SCM Tags: 

Share This Post

Related Posts

© Copyright 2016 All rights reserved

Developed and Maintained by Poorna Corp.