Despite impeding losses, Amazon India to continue investing

Even as the e-commerce behemoth continues to pump in millions of dollars into the Indian market in an all-out move to wrest market leadership from Flipkart, Amazon India’s losses are likely to rise to one billion dollars (Rs 6,816 crores) by the end of this fiscal (FY17). Sources say that Amazon is playing the market-share game in India. Internal directive to employees is not to bother about customer acquisition costs but to single-mindedly pursue growing market share to gain leadership position.

The losses are expected to be as a result of the spend on marketing, advertising, ramping up of seller initiatives/incentives, expansion of stock selection across categories, expansion of fulfilment centre network, investments in digital content and additional prime membership benefits.

For Amazon, India is a key growth region and it is investing in the country with long-term horizon to transform the way India buys and sells. While rival Flipkart focused on high-value items such as mobile phones, TVs and home appliances by forging exclusive partnerships with top brands during the festival season sales last month, Amazon also did the same but also offered attractive deals on low-ticket items such as daily essentials and continues to push them aggressively with daily deals.

Recent comments from Amazon’s top executives indicate massive investments in its key growth market India. In its Q3 2016 earning call last month, Brian T Olsavsky, Senior VP and CFO, Amazon.com informed analysts that the drag in margins in its international retail business was due in large part to its investments in India and that the company will continue to invest in India.