Amazon to pump $2bn into India A Day After Flipkart Raised $1Bn, Global Giant Intensifies E-Comm BattleExpect More Investments In Future, Says India Chief Even as the buzz over the massive $1-billion fund raise announced by Flipkart on Tuesday was settling down, Amazon, the worlds largest online retailer, declared its intent to invest $2 billion in India. The announcement takes the e-commerce battle between the two biggies to a fever pitch. Jeff Bezos, founder of the Seattle-based Amazon, said on Wednesday that at current scale and growth rates, India is on track to becoming a market where the e-tailer will clock a billion dollars in gross sales. Bangalore-based Flipkart, now valued at $7 billion, had achieved the milestone earlier this year. The two back-to-back announcements have put the Delhi-based Snapdeal, one of the three larger e-commerce players in India, under pressure to raise fresh capital to fight Flipkart and Amazon in a fast-growing market backed by billions of dollars of investor money. Bezos said the response from customers and small and medium-sized businesses here had surpassed Amazon’s expectations. “We see huge potential in the Indian economy and for the growth of e-commerce in India. With this additional investment, our team can continue to think big, innovate, and raise the bar for customers in India.” Amazon, estimated to be clocking $500 million in gross sales, will use the investment to expand its product selection by launching new categories. The fund raise will add heft to its existing 28 categories, improve delivery experience, lower cost structures for sellers, and push its mobile platform, Amit Agarwal, vice-president & country manager at Amazon, told TOI in an exclusive chat. The online retailer has been aggressive in its investments in India since its entry. Its rapid growth and ambition may have triggered in vestments secured by other players, he said. Flipkart’s announcement of raising $1 billion in funding had indicated to the market that it may be able to maintain its lead over Amazon. But with this investment, Amazon reinforces its intention to be at the No. 1 position in the Indian e-commerce market, said Ashish Jhalani, founder of Etailing India. “India’s e-commerce in dustry has truly arrived with $3 billion of investments coming in a span of two days. We are currently where the US was in 2003 and China was in 2007. You can expect a five times growth of the market over the next few years, and there is a possibility that it may become a two-way battle between Flipkart and Amazon,” said Rehan yar Khan, general partner, at Orios Venture Partners. The Indian e-commerce market, estimated to be $2.3 billion, is expected to become $32 billion strong by 2020, as per the retail consultancy Technopak. The Amazon marketplace in India is operated by Amazon Seller Services, an affiliate of the Nasdaq-listed Amazon. The India announcement comes at a time when Amazon’s investors and shareholders have been wary about the company’s continued investments in new businesses without turning in consistent profits. Indicative of the fierce battle simmering between the two online retailers, the Amazon office in Bangalore was abuzz Wednesday with elevator talks of Flipkart raising a billion dollars on a day when Jeff Bezos said $2 billion of investments will be pumped into the e-tailers India operations. Amazon, which launched its marketplace in India a year ago, had so far allocated roughly $300 million to India. But with this gargantuan investment in place, Amazon now tops Flipkart which has in all raised $1.7 billion. Amit Agarwal, VP & country manager, Amazon India, sat down with TOI for an hour to explain its still very early days for the $75-billion e-commerce giant in India... How significant is this investment announcement coming on the back of Flipkarts $1-billion fund-raise? How will it be deployed? These decisions do not get made in a few hours. Our intention has been very clear from the very beginning. Weve been aggressive about our investments since we entered India and these investments have produced the results that we are seeing. However, this investment is a proof that what we believed would work in India has actually worked and worked beyond our expectations. Its quite possible that our rapid growth and ambitions have triggered investments elsewhere. We dont need to change anything from how we have been doing things over the past year . So, we will add new categories, keep investing in our seller base with things like Fulfillment by Amazon, strengthen our mobile platform and improve our delivery . Things have only accelerated since we launched in June 2013, weve added a category every 13 days in the last one year. How does Amazon justify this investment at a time when there is increased shareholder pressure to turn in profits? Having been at Amazon for 15 years, I can say that weve been like this forever. The $2billion allocation reinforces what Amazons philosophy has always been, which is to keep investing for shareholders return over the long term. As far as India is concerned, we are just getting started here, it is just day one, customers here should expect more investments in the coming years and decades as we will not slow down. We will be aggressive and not conservative. Would you look to adopt an inventory model or stick to a marketplace even if the ecommerce sector opens up to FDI? We do not look at it like one model against the other . But FDI is good for the overall ecosystem as it allows us and other players to source a larger selection from a lot of smalland medium-sized merchants, which our sellers are not able to offer . This could be because they do not have the working capital or the capacity . Eventually , what it does is it brings more customers as the selection widens. Also, there are many manufacturers who want to directly sell to us and not want to be retailers of products. Is the fight of the e-commerce market in India now between Amazon, Flipkart and Snapdeal? India is very large, many models will get invented and there will be multiple winners. As far as Amazon is concerned, we want to be Indias most customer-centric company , no matter how much investments are required. Internet changes the pace at which innovation happens. In India, players will continue to find ways to reach the customer but we have to be the fastest at those building innovations. We will not settle for anything less than being the winner.
Posted on: Thu, 31 Jul 2014 11:09:18 +0000
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