Amazon to invest $2 bn in India; on track to hit $1 bn sales

AmazonNew Delhi: Upping its ante in India's fiercely competitive online shopping space, e-commerce giant Amazon on Wednesday said it will invest USD 2 billion in the country to grow the business in a market that is dominated by homegrown players like Flipkart and Snapdeal.

The US-based firm's announcement comes less than 24 hours after rival Flipkart announced raising a whopping USD 1 billion funding, the largest in the e-commerce space in India.

Amazon, which launched its marketplace in India last year, said the country is one of its fastest growing markets and is on track to touch USD 1 billion in gross sales.

It will invest an additional USD 2 billion to support its rapid growth and continue to enhance the customer and seller experience in India, Amazon said in a statement.

"After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations," said Jeff Bezos, founder and CEO of Amazon. Com.

The company sees huge potential in the Indian economy and for the growth of e-commerce, he added.

"With this additional investment of USD 2 billion, our team can continue to think big, innovate, and raise the bar for customers in India," he said.

At current scale and growth rates, India is on track to be Amazon's fastest country ever to a billion dollars in gross sales, he said.

"We have never seen anything like this," Bezos said. In India, Amazon sells over 17 million products across categories like books, apparel and electronics from a growing base of thousands of small and medium-sized businesses.

Apart from smaller e-commerce portals, Amazon competes head on with Flipkart and Snapdeal. In the past few months it has raised the bar with introducing same-day delivery and ramping-up its logistics among others.

Earlier this week, Amazon said it will open 5 new centres across India in addition to its two fulfilment centres (FCs) in Mumbai and Bangalore. The FCs will be set up in Delhi, Chennai, Jaipur, Ahmedabad and Tauru (outskirts of Gurgaon).

This, it said, would help in faster delivery of products. With the addition of the five centres, Amazon's total storage capacity will almost double to over half a million sq feet.

Amazon did not specify the timeframe in which it will invest USD 2 billion in Indian operations.

Last week, Amazon announced a wider net loss of USD 126 million in the April-June quarter of 2014 compared with a net loss of USD 7 million in the year-ago period.

However, its net sales increased 23 percent to USD 19.34 billion in the second quarter, compared with USD 15.70 billion in second quarter of 2013.

For the period ended June 30, 2014, Anmazon's cash and cash equivalents stood at USD 5.07 billion.

Players in the e-commerce market have been aggressively investing in infrastructure and logistics to improve delivery time and quality of service to woo more customers.

Both Flipkart and Snapdeal, in the last few weeks, have opened centres to ensure delivery within 24 hours.

Flipkart has four Mumbai, Delhi, Kolkata and Bangalore, while Snapdeal has 40 FCs across 15 cities. E-commerce firms have benefitted greatly from the increasing Internet penetration. As broadband consumption in the country grows, these firms have found customers in even remotest corners of the country.

Analysts are of the view that such centres will help in delivering the same quality of service in these parts.

According to consulting firm Technopak, the USD 2.3 billion (2014) e-tailing market in India is projected to reach 3 percent of the Indian retail space to touch USD 32 billion, by 2020.--PTI