Amazon to invest $2 billion in India, a day after Flipkart's $1 billion funding
Jeff
Bezos said he will spend $2 billion (Rs 12,000 crore) to grow Amazon's online
retail business in India in what amounted to a dare to Indian market leader
Flipkart which only on Tuesday announced raising $1 billion in funding from a
bevy of global investors.
This is the strongest indication by the
Seattle-based Internet entrepreneur of his intent to battle for top honours in
the Indian online retail market where Amazon is on track to record sales of
over Rs 6,000 crore in just over a year of
operations.
"We've
never seen anything like this," said Bezos, the founder and chief
executive officer of Amazon. "After our first year in business, the
response from customers and small and medium-sized businesses in India has far
surpassed our expectations," he said in a statement on Wednesday.
By
making this announcement within a week of Amazon declaring a loss of $126
million on revenue of $19.34 billion in second quarter of 2014, Bezos is seen
to be signalling in no uncertain terms his commitment to grow his business in
India after having failed to make inroads in the Chinese online retail industry
dominated by Jack Ma's Alibaba Group.
We see huge potential in the Indian economy and for the growth of ecommerce in
India. Our team can continue to think big, innovate, and raise the bar for
customers in India," he said. Experts said Amazon's salvo is a clear
message to competitors that it does not want to play second fiddle to anyone.
"They want to be seen as a leader, not as a challenger," said Arvind
Singhal, chairman of retail advisory Technopak.
Flipkart, which is now also backed by Singapore's sovereign wealth fund GIC in
addition to existing investors like South Africa's Naspers and Tiger Global
Management who led the latest round of funding, has now received over $1.7
billion in risk capital funding.
Thirty-two
year old Sachin Bansal, Flipkart's chief executive officer, said his company,
which investors have valued at $7 billion, will use the latest round of funding
to "shape the market in a way that we want." The Bangalore company is
expected to splurge money on more discounts for customers, make acquisitions,
beef up its logistics network and build out greater capability in mobile and
payment technologies. "We are confident that as a local entrepreneurial
company, Flipkart has the advantage of being on the ground and better connected
to the market we serve," said Bansal.
Amazon's
aggression is already apparent - it now sells over 17 million products across
28 categories and hosts 8,500 merchants on its platform -- and that is expected
to only increase. Earlier this week it opened five more warehouses, almost
doubling its storage capacity to over half million square feet.
"From
day one, our ambition has been to be India's most customer-centric
company," said Amit Agarwal, vice-president and country head of Amazon.in.
Investments in product categories, logistics, increasing seller base and in
mobile technologies will increase, according to the 40-year-old Amazon
executive who reports directly to founder Bezos.
The
all-out war in the Indian online retail space is increasingly being fought on
the mobile platform. Amazon said about 35 % of all sales in India come through
mobile devices while Flipkart and Snapdeal claim that nearly 50% of all
transactions are on hand-held devices.
By stepping up to tell the world about Amazon's progress in India, Bezos wants
to assure customers that his company is here to stay while at the same time
declaring war on his rivals, primarily Flipkart.
"It is abnormal for Bezos to talk about
numbers. He never talks about investments or top line. This shows how important
India is to Amazon. This is completely new," said a senior executive at a
consumer internet company who until last year was employed at Amazon. "He
wants to show that if Flipkart spends one dollar, Amazon will spend two."
No comments:
Post a Comment