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Business News/ Industry / Retail/  A year on, Amazon raises stakes in India, quickly grows seller base
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A year on, Amazon raises stakes in India, quickly grows seller base

Amazon's moves have forced rivals to raise more capital, seek acquisitions to keep the US-based company at bay

Amazon Seller Services offers 15 million products across 28 categories, including electronics and apparel, and also claims to have the largest product assortment in 11 of these categories, including books and toys. Photo: ReutersPremium
Amazon Seller Services offers 15 million products across 28 categories, including electronics and apparel, and also claims to have the largest product assortment in 11 of these categories, including books and toys. Photo: Reuters

Bangalore: In just a year since its launch, the world’s largest online retailer, Amazon.com Inc., has emerged as a force to reckon with, in India, too.

In June 2013, Amazon Seller Services Pvt. Ltd, the firm’s India business, launched with books and video content. It now offers 15 million products across 28 categories, including electronics and apparel, and also claims to have the largest product assortment in 11 of these categories, including books and toys.

Amazon does not disclose the investments it has made in India over the past year. However, documents filed with the Registrar of Companies (RoC) show the firm has increased the capital it can invest in India to as much as 1,500 crore in December from 200 crore in 2012-2013.

Amazon Seller Services also reported a revenue of 112.4 crore for the full year ended 31 March 2013—the latest year for which figures are available, the documents show.

“I’d say that the pace at which we’ve ramped up in India is one of the fastest ramp-ups we’ve seen at Amazon," Amazon India country head Amit Agarwal said in a recent interview.

He added that given “how fast our selection has increased, how fast our marketplace has grown, how fast we’ve improved the delivery experience, (and) how fast our mobile adoption has grown—it’s really exciting, and (we) would rank among the fastest we’ve seen".

Moreover, third-party sellers are being courted aggressively by e-commerce firms even at the risk of hurting the quality of shopping experience, and online retailers are racing with each other to get products delivered to customers.

Indian law does not permit Amazon to sell its own goods, so it has to operate through the marketplace model where third-party merchants sell to customers. The number of third-party sellers on its site has risen to over 6,500 from a mere 100 a year ago.

In comparison, Snapdeal has over 30,000 sellers, Shopclues more than 40,000, and India’s largest e-commerce firm, Flipkart, over 3,000 merchants on its platform.

The pace at which Amazon is adding sellers has increased since late April, when it started offering self-registration for merchants. In the week after it launched the service, Amazon added as many as 1,000 sellers, according to Agarwal.

Amazon has started another software development centre in India in addition to its three centres in Bangalore, Chennai and Hyderabad, and will hire “hundreds of engineers" for it this year, according to one person familiar with the matter. The new centre in the National Capital Region currently supports Amazon’s India business, the person said not wanting to be named.

Amazon did not respond to an email seeking comment on this specific issue.

Amazon’s moves in India have forced local rivals such as Flipkart and Snapdeal to raise higher amounts of capital and look for acquisitions to keep the US-based company at bay.

Flipkart, which raised $360 million last year, said in May that it received another $210 million, mostly from new investors, while Snapdeal raised money twice this year, till date, totalling $233.7 million.

They will need to raise more as Amazon is accelerating its expansion, say experts.

Amazon’s entry has also clearly led to an increase in discounts, especially in large product categories such as electronics, small and large appliances, as well as apparel, said Sanjay Sethi, chief executive at Shopclues, an Amazon rival.

“However, it’s a validation that India’s e-commerce story is real. I’d be worried if Amazon wasn’t doing business in India because then it would make me think that why isn’t Amazon seeing the huge opportunity that we and others over here are. So it’s a positive that Amazon is here and I think the market size is big enough for Amazon and for local horizontal players like us to exist," Sethi said.

Besides the steep discounts being offered, competition for talent has intensified, prompting e-commerce firms to offer higher salaries, experts add.

Amazon’s speed of expansion here reflects the importance of India for the company that has failed to make a significant dent in China, the second largest e-commerce market after the US, analysts said.

Online retail in India is estimated to grow to $22 billion in five years from $3.1 billion, according to a November 2013 report by brokerage firm CLSA, and analysts expect the country to be the third largest e-commerce market in the world over the next few years.

Executives at Flipkart and Snapdeal have been “surprised" by the speed at which Amazon has expanded in India, two investors that back these companies said, on condition of anonymity.

“Flipkart is watching every step of Amazon closely and the urge to grow faster has increased significantly after Amazon’s entry," the Flipkart investor said. He added that Flipkart’s purchase of online fashion retailer Myntra last month was partly driven by the need to increase the distance between the firm and Amazon.

Going forward, Snapdeal and other local firms will find it very “challenging" to keep up with Amazon’s expertise in technology and data analytics, the Snapdeal investor said.

“Technology and data analytics are going to become increasingly crucial in e-commerce and Amazon has a proven track record of being the best in these. This is where potentially it’s a concern for Indian e-commerce firms," the investor added.

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Published: 26 Jun 2014, 09:36 PM IST
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