Ama­zon pumps funds into In­dian unit

The Pak Banker - - COMPANIES/BOSS -

Ama­ Inc., the world's largest on­line re­tailer, has in­fused an ad­di­tional Rs.1,696 crore into its In­dian unit, arm­ing it with more am­mu­ni­tion in its bat­tle with lo­cal ri­vals Flip­kart and Snapdeal to be­come the coun­try's largest e-com­merce firm.

The lat­est infusion, which came in De­cem­ber, is the sin­gle largest tranche of funds re­ceived by Ama­zon Seller Ser­vices Pvt. Ltd, the In­dian unit of Ama­zon, since 2014, ac­cord­ing to doc­u­ments filed with the Reg­is­trar of Com­pa­nies. Ama­zon In­dia has now re­ceived Rs.5,699 crore since July 2014, when Jeff Be­zos, co-founder and chief ex­ec­u­tive of­fi­cer (CEO) of Ama­zon, promised to in­vest $2 bil­lion in In­dia over time, the doc­u­ments show.

In com­par­i­son, ri­vals Flip­kart Ltd and Snapdeal (Jasper In­fotech Pvt. Ltd) have raised $2.1 bil­lion and $1.3 bil­lion, re­spec­tively, from in­vestors in that pe­riod. Since launch­ing in In­dia in June 2013, Ama­zon has ap­plied its mantra of low prod­uct prices, wide prod­uct se­lec­tion, and fast and re­li­able de­liv­ery to gain pop­u­lar­ity with shop­pers.

Among e-com­merce com­pa­nies, Ama­zon spent the most on ad­ver­tis­ing and mar­ket­ing its brand last year. It's also in­vest­ing hun­dreds of crores of ru­pees on build­ing its sup­ply chain net­work.

The lo­gis­tics foot­print of Ama­zon In­dia grew three times to more than 2,100 cities and towns in 2015 and the com­pany added eight ware­houses last year, in­creas­ing its count to 21. It has the most ware­houses and largest stor­age space among e-com­merce firms in In­dia, ahead of Flip­kart, which has 17.

The spend­ing has worked well so far. Last year, Ama­zon gained mar­ket share from Flip­kart and Snapdeal. In the June quar­ter, Ama­zon's sales-net of dis­counts, prod­uct re­turns and taxes-surged more than 300% com­pared with the year- ago pe­riod, Mint re­ported on 15 Au­gust. Then, in the Septem­ber quar­ter, the com­pany wit­nessed a 500% year-on-year growth in vol­ume and the num­ber of ac­tive cus­tomers jumped 230% over the year-ago pe­riod, Ama­zon said.

Th­ese num­bers are far higher than those re­ported by Flip­kart and Snad­peal. While th­ese two com­pa­nies are still sig­nif­i­cantly big­ger than Ama­zon, the US-based on­line re­tailer is catch­ing up rapidly.

"We are very pleased with the growth mo­men­tum we are wit­ness­ing in In­dia. At the end of Q3 2015 (July-Septem­ber), we saw an ap­prox­i­mate 500% year-on-year growth in vol­ume, and in Q4 2015 (Oc­to­berDe­cem­ber) we sold more than we did in all of 2014. We are com­mit­ted to in­vest­ing ag­gres­sively with a long-term hori­zon and trans­form the way In­dia buys and sells," an Ama­zon In­dia spokesper­son said in an emailed re­sponse to queries from Mint.

In­dia is of im­por­tance to Ama­zon, es­pe­cially given its fail­ure to con­quer China, which is dom­i­nated by Alibaba (Alibaba Group Hold­ing Ltd). Alibaba is also strength­en­ing its foot­print in In­dia by in­vest­ing in Snapdeal and Paytm (One97 Com­mu­ni­ca­tions Pvt. Ltd). In­dia's e-com­merce mar­ket is likely to grow to $100 bil­lion by April 2020, ac­cord­ing to a Gold­man Sachs re­port in Oc­to­ber.

"Ama­zon has been say­ing that In­dia is go­ing to be their big­gest mar­ket op­por­tu­nity out­side the US," said Arvind Sing­hal, chair­man and man­ag­ing di­rec­tor of Technopak, a retail con­sul­tancy. "This is be­cause, in China, they are way be­hind Alibaba. In In­dia, Ama­zon has not only been putting money in ad­ver­tis­ing and dis­count­ing, but also in­vest­ing a lot on build­ing a phys­i­cal in­fra­struc­ture, in­clud­ing ful­fil­ment cen­tres, which will give them a com­pet­i­tive ad­van­tage over ev­ery­body else."

Ama­zon's ri­vals are not sit­ting idle. Ear­lier this month, Flip­kart named co-founder Binny Bansal as its new CEO, re­plac­ing Sachin Bansal, in a move that it claimed would strengthen its man­age­ment band­width as it seeks to com­bat Ama­zon In­dia and kick off prepa­ra­tions for an ex­pected ini­tial pub­lic of­fer­ing over the next few years.

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