Amazon’s losses jump 5-fold on India investment
Amazon.com Inc.’s loss from its international business surged in the June quarter, mainly because of its investments in India, but the US-based e-commerce giant intends to aggressively pursue expansion in the market where it’s locked in a fierce fight for dominance with local leader Flipkart.
Amazon’s international loss widened more than fivefold from a year ago to $724 million in the three months ended June, the company said on Thursday. The world’s largest online retailer’s overall net sales, including in the US, increased 25% to $38 billion, but overall profit plunged 77% from a year ago to $197 million.
In a post-earnings conference call with investors and analysts, Amazon’s chief financial officer Brian T. Olsavsky indicated that the online marketplace had invested heavily in India and on the launch of its Echo devices and Alexa voice platform, which resulted in international losses widening.
“The year-over-year difference (in international loss) is primarily driven by investments — what we were within the guidance range and we continue to invest in, as I said, fulfilment capacity and logistics services, digital video, our Echo and Alexa, Echo devices and Alexa platform, India, the buildup at the AWS (Amazon Web Services) infrastructure, all the things I mentioned, not to mention Prime Now and Amazon Fresh and Prime benefits,” said Olsavsky.
Earlier this year, Mint reported that Amazon had invested another Rs1,680 crore in its Indian unit as part of its commitment to invest $5 billion to expand its local business.
For Amazon, India represents a crucial battlefront where it is locked in a battle with arch-rival Flipkart to dominate what is seen as the world’s last major unconquered Internet market.
“We continue to invest in India. We’re very hopeful with the progress we’ve made with sellers and customers alike in India and we see great momentum and success there, so we continue to invest and we have some of our best people in that business,” said Olsavsky.
Over the past four years, Amazon has expanded at a breakneck pace in India and has almost caught up with Flipkart in terms of stand-alone monthly sales. Mint reported earlier in July that Flipkart, which started out in 2007, continues to be well ahead of Amazon in terms of overall monthly sales, including sales from its fashion units Myntra and Jabong, but Amazon is catching up fast.
In fact, in terms of other key metrics such as app downloads, desktop visits and mobile website visits, Amazon India has already overtaken Flipkart. According to data from market intelligence firm SimilarWeb, which tracks website traffic, Amazon India’s desktop visits stood at 276 million for the quarter ended 30 June, compared to 167.6 million for Flipkart. For its mobile website, Amazon India recorded 311 million visits during the June quarter, compared to 157 million for Flipkart, according to SimilarWeb.
The battle between Flipkart and Amazon has intensified over the past two years and, according to experts, is unlikely to conclude anytime soon, given that both companies are extremely well funded.
In April, Flipkart raised a massive $1.4 billion from Tencent, eBay and Microsoft, and is also expected to raise further round of funds from Japan’s SoftBank, after it completes its proposed buyout of troubled rival Snapdeal.
Amazon also has enough financial muscle to fight Flipkart in India and in recent interviews Amazon’s India chief Amit Agarwal has indicated that the company will spare no expense to conquer India. Amazon is desperate to dominate the Indian Internet market, after losing out to Alibaba.com in China.
In June 2016, Amazon.com said it would invest an additional $3 billion in India after the company exhausted its earlier investment pledge of $2 billion made in 2014.
Amazon has been spending money on building massive warehouses, a large logistics unit, marketing, discounts and increasing product assortment in India.