Amazon commits $2b more to India

Tags: News

Treasure chest trumps Flipkart’s $1b top-up

Amazon commits  $2b more to India
Amazon on Wednesday said the company plans to invest around $2 billion to fund its rapid growth. The announcement came just a day after Flipkart, India’s largest e-tailer, raised fresh $1 billion funds in a bid to aggressively scale up expansion. Competition in the e-commerce space is obviously heating up.

“After our first year in business, the response from customers and small- and medium-sized businesses in India has far surpassed our expectations," said Amazon founder and chief executive officer Jeff Bezos in a statement. "We see huge potential in the Indian economy and for the growth of e-commerce in India. With this additional investment of $2 billion, our team can continue to think big and innovate. At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales – we have never seen anything like this."

After coming into the picture last June, Amazon has taken on rivals by slashing prices, launching next-day delivery, adding new product categories and advertising aggressively.

"Funding is important to build the business but it also important how it is used to build sustainable differentiation and an edge over the competition," comments Pragya Singh, associate vice president, retail, Technopak Advisors. “The timing of the announcement of Amazon’s investment a day after Flipkart’s has made the message clear: that Amazon is looking at India very seriously."

Debashish Mukherjee, principal, AT Kearney India, said e-commerce is expected to grow faster in India and China compared to other markets but none of the players in the country are profitable as yet. “We are talking about success stories of only two players whereas many have failed to succeed in this space,” he cautioned.

Although the common impression is that an e-commerce company does not have to hold inventory, Amazon is providing warehouse facilities to its vendors. "In the past one year, it has been investing in back-end, vendors, logistics, building categories and warehouses," adds Technopak's Singh.

Since its launch over a year ago, Amazon has grown to be India’s largest online store, with over 17 million products from a continually growing base of thousands of small and medium-sized businesses, serving millions of customers who are guaranted next-day delivery.

Going forward, experts see more consolidation in the industry, as scope does not exist for too many players. Amazon and Flipkart are seen as the two strong, aggressive and well-funded players, with Snapdeal, eBay and Jabong also having a substantial market. Flipkart acquired online fashion portal Myntra on May 22. Amazon, with its deep pockets, could also add some e-commerce players to its shopping cart.

jharnamazumdar@mydigitalfc.com

(With inputs from G Sangeetha, Chennai)

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