Amazon Betting Big on Indian Market; Ramps up Investment to $7 Billion

June 14, 2018June 14, 2018 Geekopedia 0 Comment Amazon, E-commerce, Flipkart, Indian, Investment, Sale, Walmart

For almost a year now, there were rumors going around, that soon Walmart will acquire a majority stake in Indian e-commerce company Flipkart. It is believed that Walmart’s deal with Flipkart is not just about its entry in the Indian markets. Rather, the deal is an attempt by both Walmart and Flipkart to reduce the profit of their common rival Amazon in the Indian e-commerce.

However, since Amazon has already deeply rooted its branches in Indian e-commerce, its members obviously must have a plan to retain its top rank in the industry alongside coming up with exciting deals, discounts and regular Amazon today’s offers. Knowing this well, everyone was anxiously waiting for some sort of reaction and announcement from the people at Amazon. Unfortunately, there was no information at all from Amazon regarding their future plans in India.

But, all this has changed now recently, when, in May 2018, it was announced that Walmart had agreed to close the deal with Flipkart for $16 billion with nearly 77% stake in the company. And, just a month after this announcement, CNBC reported that the Amazon chief Jeff Bezos is planning to increase its investment in India, from earlier $ 5 billion to $ 7 billion. This announcement will certainly further heat up the e-commerce battle in India.

Earlier, CNBC-TV also reported that there was a time when Amazon was racing Walmart to acquire a controlling stake in Flipkart. However, as everyone knows, Walmart emerged as a clear winner in that battle.

Moving on, throwing a little light on the future plans of Amazon in India, an unnamed source had a discussion with CNBC on this. The source informed that Amazon is aware of the fact that Indian e-commerce is one of the fastest growing business and that “after Walmart’s acquisition of Flipkart, Flipkart’s ability to increase market share and India presence will increase.” And, so Amazon has no plans of being left behind.

Many people might view this probable decision by Jeff Bezos of increasing Amazon’s investment in India by $ 2 billion to be an uncalculated one. But, he has already done taken this kind of massive leap earlier as well.

In 2016, after analysing the rapid growth and bright future of Indian e-commerce and its possible benefits for Amazon’s business and popularity, Jeff Bezos increased the investment of the company in India from $ 2 billion to $ 5 billion. At that time, it was clearly reported and outlined that this increase of $ 3 billion, Jeff Bezos intends the rapid expansion of the company in India, not only in terms of investments and profits but also in terms of employment growth.

The announcement of this was made when, in 2016, the Indian Prime Minister Narendra Modi, visited Washington to attend a USIBC meet. Bezos announced “Amazon will invest $3 billion more in India. This is in addition to the $2 billion announced in 2014”. Not only this, Jeff Bezos further highlighted growth in employment that Amazon has generated in India. “We have already created some 45,000 jobs in India and continue to see huge potential in the Indian economy,” he said.

However, it would be right to say that while the decision at that time was definitely crucial, this time, the stakes are even higher for the company. This time, Amazon’s increased investment is not only a decision made with an intent for expansion but also its strategy to outgrow Walmart’s impact on Indian e-commerce and retain its position in India.

After talking to another source which has information regarding Amazon’s development, CNBC reported the strategic implementation of Amazon’s plan. The source informed CNBC that “Amazon may start with increasing its investment target in India to $2 billion and increase it over a period of time.” And, Amazon’s senior management has been informed about the company’s investment increase in India.

Not only this, it is rumoured that the Indian team of Amazon has already outlined a clear strategic plan to maintain and further increase the company’s presence in India. CNBC-TV announced to the reports and analysis released last month by Citi, Amazon India is valued almost $ 16 billion, which surprisingly the same price which Walmart paid to acquire 77% stake in Flipkart.

Moreover, according to Citi, “Amazon India will reach GMV of $70 billion and revenue of $11 billion by 2027 seeing an annual revenue growth of 23%.” But, according to Citi, in terms of market share, Flipkart is likely to continue to stand ahead of Amazon India. This is because of the huge gap between the percentages of the market share. While the current market share of the Amazon is at 30% that of Flipkart is at 60 (including its fashion and mobile units).

However, the Amazon’s CFO, Brian Olsavsky, is not much affected by the statistics as he believes that the increasing growth of Indian market will definitely benefit Amazon. He told the investors that “We will continue to invest in India where we are seeing great progress with both sellers and also customers. And we like the momentum we have seen there. The Prime programme started in the first year in India grew faster than any Prime programme we have seen in other countries”.

Therefore, it would be interesting to see the growth of both the rival e-commerce companies, Amazon and Flipkart.