Home/ Industry / Retail/  Amazon India’s sales rise but loss widens amid

Bengaluru: Amazon Seller Services Pvt. Ltd, the Indian unit of the world’s largest online retailer, reported a 50.2% jump in sales to 168.9 crore for the year ended 31 March, as the company quickly expanded its India marketplace platform to emerge as the biggest threat to local rivals Flipkart and Snapdeal.

Amazon India’s loss for last fiscal, however, widened to 321.3 crore from 24.6 crore in the previous year, reflecting the heavy investment in marketing, discounts and supply chain that has enabled the fast revenue growth at the company, documents with the Registrar of Companies (ROC) show.

Amazon India’s business comprises its marketplace platform Amazon.in, sales of its e-book reader Kindle and other products, and revenue from providing marketing services to its fellow group companies.

India is one of the last of the potentially large e-commerce markets in the world. It’s important for Amazon to establish a large business in the country after having lost out to Alibaba in China, which overtook the US last year to become the largest e-commerce market in the world.

Accordingly, Amazon, which launched its India platform in June 2013, increased its capital commitment in its India business to as much as 1,500 crore last fiscal from just 200 crore earlier. In July, Amazon chief executive Jeff Bezos promised the company would invest as much as $2 billion in India over the next few years. Bezos even visited India for five days in October to encourage Amazon India executives to build on their impressive launch and meet with business partners and politicians, including Prime Minister Narendra Modi.

Amazon needs to spend heavily in India as rivals Flipkart and Snapdeal have amassed large war chests of their own. A day before Bezos promised to invest $2 billion in India, market leader Flipkart announced it received $1 billion in fresh funds from investors such as Tiger Global Management and Naspers, a landmark for India’s fledgling but fast growing e-commerce sector. Last week, Snapdeal raised $627 million from Japan’s Softbank, which is also the biggest investor in Alibaba.

Unlike its US rival eBay Inc., which has shown a reluctance to spend heavily in India despite entering the country as early as 2004, Amazon has been much more aggressive in growing its business here, even setting up seller entities through a joint venture with Infosys Ltd co-founder N.R. Narayana Murthy’s investment firm Catamaran Ventures.

India bans foreign direct investment (FDI) in direct online retail, so Amazon and other e-commerce sites including Flipkart and Snapdeal have set up complex structures that on paper show that these companies operate purely as marketplaces. Rather than owning products, these companies claim that they only connect buyers with third-party merchants on their websites and mobile platforms.

Still, these structures have caught the eye of Indian regulators. The Enforcement Directorate is probing Flipkart for possible violation of FDI laws; the regulator has also asked Amazon India and Snapdeal for more information about their business models.

Amazon is selling products on its Indian website that are sourced by the joint venture, an arrangement that could draw additional regulatory scrutiny on the world’s largest online retailer, Mint reported on 6 October.

Mint also reported on 21 October that Amazon, Flipkart and Snapdeal have a significant say in deciding product prices of their sellers as all the three sites finance part and, in some cases, the full amount of discounts offered by sellers—albeit in an indirect manner.

Amazon has hired independent consultants to conduct a transfer-pricing study to determine whether transactions with associated enterprises in the last fiscal were undertaken at “arm’s length price".

It wasn’t clear which are these associated enterprises referred to by Amazon.

“The management believes that all domestic and international transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms and believes that there should be no material adjustments on completion of the study," Amazon said in its annual report with the ROC.

According to the ROC documents, a top Amazon India executive, Amit Deshpande, resigned from the company’s board effective July. Deshpande continues to hold his executive role, general manager of seller services, at Amazon India.

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Updated: 03 Nov 2014, 08:23 PM IST
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