TARGET: BIGGEST MKT OUTSIDE US – Amazon Readies $5b India Chest for Bigger Play

To launch instant video and subscription-based ecomm services for high-end buyers
Amazon, the world’s largest online retailer, is readying a $5-billion war chest to grow India into its biggest market outside the US, according to two people directly familiar with the company’s decision.It is also set to add instant video and subscription-based ecommerce services for high-end buyers, called Amazon Prime, in India later this year. Amazon will invest most of the additional ` . 31,700 crore -a year ago, it committed to invest $2 billion in its India operations -in expanding its network of warehouses and data centres and beefing up its online marketplace to compete better with the likes of Flipkart, Snapdeal and Paytm, the people aware of its plans said.

Amazon, which turned 20 last week, has completed two years in India, where its business is now worth at least $2 billion in gross merchandise value on the ecommerce side, and includes fast-growing revenue from top Amazon Web Services (AWS) customers in the country . “Our biggest financial backer (Amazon founder Jeff Bezos) doesn’t need a fresh pitch while deciding every new investment -we are really long on India, investment figures are easily in multiples of billion dollars,“ said a person aware of the company’s plans. Amazon plans to launch its ambitious Amazon Instant Video (AIV) service in India this year and has started conversations with music labels and producers for sourcing content. In December, it hired Nitesh Kripalani, a former Sony Entertainment executive, to lead its new initiatives.

An Amazon India spokeswoman declined to offer specific comments for this story, citing the company’s financial earnings coming up next week.

For India’s three biggest ecommerce firms -Flipkart, Snapdeal and Paytm –Amazon’s fresh investments and aggressive new launches will result in cutthroat rivalry and pile pressure on their valuations as they seek more funds from venture capital investors.

Already, the top three Indian ecommerce giants have raised around $5 billion among them, with Flipkart garnering nearly $3 billion in more than one dozen funding rounds. Investors are often enthused by the Indian Internet market, which according to a Morgan Stanley report in February, could rise to $137 billion by 2020.

“Unlike us, Amazon doesn’t have to get worked up on upcoming valuations, or getting a fresh investor in every round -they can keep funding to ensure the others in the market bleed,“ said an executive at one of the Indian ecom merce companies. He also pointed to high cash burns for Flipkart, which is estimated to be around $2 million daily.

Kartik Hosanagar, professor at The Wharton School, said some of Amazon’s new bets such as Amazon Prime could take longer to take off in India.

“Overall, the bet on India will pay off well for Amazon -it’s a high-volume, low-margin business in the US; Amazon India will be similar. I don’t expect high profits from India but definitely good scale. So, while we shouldn’t expect Alibaba-like financials from India, Amazon will find that India nicely complements its efforts in the US,“ said Hosanagar.

ET VIEW Govt Should Do More to Clear Regulatory Haze Clouding Ecomm

Jeff Bezos, Amazon’s iconic founder, is betting big on India. That’s great for Indian consumers and businesses but the government should do more to clear the regulatory haze clouding the ecomerce sector.The government should lift the ban on FDI in business to consumer (B2C) ecommerce, a fallout of restrictions on multi-brand retail, which too needs to grow. World-wide two models are followed. Amazon’s pure B2C model and the marketplace model made famous by Alibaba. In India companies have to pretend to follow the marketplace model even if their actual business models are closer to the B2C version. Companies need to be free to choose which one to follow.Indian physical retailers are crying foul -and have moved court -as their ecommerce rivals have access to foreign capital while the government won’t allow strategic investors like Walmart to enter. Recently many states, including some BJP-ruled ones, batted for allowing FDI in B2C ecommerce. The government has the political cover it needs to change the rules in industry which has the potential to transform India.

Source: The Economic Times


Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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