Billionaire Jeff Bezos-led Amazon is set to ramp up its India investment to $7 billion from earlier $5 billion as the e-commerce battle heats up , sources told CNBC TV18.
“Amazon is betting big on the India market. It is evident that after Walmart’s acquisition of Flipkart, Flipkart’s ability to increase market share and India presence will increase,” said a source with knowledge of the development.
“Amazon has had its eyes and ears firmly on the ground and has been carefully planning its strategy. India is one of its fastest growing geographies and Amazon will not be left behind."
Walmart agreed to purchase nearly 77% stake in Indian ecommerce company Flipkart for $16 billion, in what is the country’s biggest foreign direct investment to date, and marking the US retail giant’s boldest attempt yet to take on Amazon online as well as giving it access to a booming market it has so far failed to crack.
In 2016, Amazon chief Jeff Bezos had increased the company’s investment in India from $2 billion to $5 billion. At that time, Bezos had clearly outlined his intention to rapidly expand in India, in terms of investment and employee growth.
“Amazon will invest $3 billion more in India. This is in addition to the $2 billion announced in 2014,” Bezos had said when Prime Minister Narendra Modi attended a USIBC meet in Washington in 2016.
“We have already created some 45,000 jobs in India and continue to see huge potential in the Indian economy,” Bezos had said.
Sources, however, say the aggression and the intent to expand is higher this time around.
“Amazon may start with increasing its investment target in India to $2 billion and increase it over a period of time,” said another source familiar with the development, but added that no definitive timeline had been outlined for the investment yet.
While there are no confirmed reports or filings on how much of the $5 billion has been invested by Amazon so far, industry experts and sources estimate that between $3.3-$3.8 billion has already come into the Indian market.
Sources also say that the senior management of Amazon has already been apprised on the investment increase and a clear cut strategy has been outlined by the Indian team to grow its presence in India.
While a bulk of this investment will go into its e commerce business, Amazon seller services, a portion may also go into other businesses including Amazon Prime.
Amazon seller services also saw
an infusion of Rs 2600 crore (about $390 million) as per documents filed with the Registrar of Companies (ROC). Amazon was also reportedly in the race to buy Flipkart and as per CNBC-TV18 sources, had also placed a bid to acquire a controlling stake in the company.
But with Walmart emerging the winner in the battle for Flipkart Amazon has its eyes firmly on the end result--growth before profitability.
According to a research released by Citi last month, Amazon India is valued at $16 billion,
the same price Walmart paid buy the 77% stake in Flipkart.
However, Flipkart has a higher gross merchandise volume (GMV) of $7.5 billion including Myntra, compared to Amazon’s GMV of $5 billion despite that.
Citi predicts that Amazon India will reach GMV of $70 billion and revenue of $11 billion by 2027 seeing an annual revenue growth of 23%.
While that’s a far away target, as things stand Flipkart is still ahead of Amazon India in terms of market share.
Amazon’s current market share, as per citi, stands at 30%, whereas as Flipkart reportedly stands at 60%, including its mobile and fashion unit.
“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,” Amazon CFO Brian Olsavsky had told investors at the company's earnings call.
When asked for a comment on the development, an Amazon spokesperson said the company did not comment on rumours and speculations.
Read our comprehensive coverage of the Walmart-Flipkart deal here.