Amazon to invest $2 billion more in India to pump growth, cut losses

Move comes after homegrown e-tailer Flipkart got investments of $1 billion.

By: ENS Economic Bureau | New Delhi | Published: July 31, 2014 1:35 am
Just two days ago, Amazon had announced the expansion of its fulfillment centres, or warehouses from where it ships products to end-customers. Just two days ago, Amazon had announced the expansion of its fulfillment centres, or warehouses from where it ships products to end-customers.

A day after Flipkart said it raised $1 billion in fresh capital, the world’s largest online retailer Amazon.com Inc. announced that it would invest as much as $2 billion in India.

While Amazon did not give a time frame for the investment, a spokesperson indicated that it would be a “continuous flow allowing us to aggressively invest in growing our business and enhancing customer and seller experience”.

“After our first year in business, the response from customers and small- and medium-sized businesses in India has far surpassed our expectations,” Amazon chief executive officer (CEO) Jeff Bezos said in a statement.

“We see huge potential in the Indian economy and for the growth of e-commerce in India. At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales. A big ‘thank you’ to our customers in India — we’ve never seen anything like this.”

Just two days ago, Amazon had announced the expansion of its fulfillment centres, or warehouses from where it ships products to end-customers. From its existing two in Mumbai and Bangalore, the e-commerce giant will now open fulfilment centres in Delhi, Chennai, Jaipur, Ahmedabad and Tauru (on the outskirts of Gurgaon). The move will double Amazon’s storage capacity to over half a million sq ft.

The $2 billion investment comes at a time when Amazon has registered heavy losses in its global operations during the second quarter of this year.

Amazon started its operations in Indian about a year ago and currently has over 17 million products across several categories out of which 3,00,000 are available for next day delivery.

Amazon Seller Services Pvt Ltd, the firm’s India business, launched its India marketplace in June 2013 and has rapidly expanded its product range to become the biggest competitor to market leaders Flipkart and Snapdeal. Amazon now offers 15 million products across 28 categories, including electronics and apparel, and also claims to have the largest product assortment in 11 of these categories, including books and toys.

With domestic regulations not permitting global firms such as Amazon to sell its own goods, it has to operate through the marketplace model where third-party merchants sell to customers. The number of third-party sellers on its site has risen to over 6,000 from just 100 a year ago.
Snapdeal has over 30,000 sellers, Shopclues more than 40,000 on its platform. Flipkart said on Tuesday that it raised $1 billion in fresh capital from existing investors including Tiger Global, Naspers and Government of Singapore Investment Corp, marking the largest-ever fund raise by an Indian start-up and among the largest ever by any Internet start-up globally.

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