Amazon's $4b vote of faith in Indian growth

Latest investment reflects sunny prospects for e-commerce market

WASHINGTON • Amazon will pump in another US$3 billion (S$4 billion) to build its business in India, betting that the country will become a major online shopping market that will fuel sales growth.

The latest commitment, unveiled by CEO Jeff Bezos at the US-India Business Council's Leadership Summit in Washington, more than doubles Amazon's total investment pledged since 2014 to US$5 billion.

Amazon has targeted India for international growth after pulling back from China due to fierce competition from that country's e-commerce giant Alibaba Group. As well as seeking new customers, Amazon is looking in India for new inventory to sell globally.

The online giant, which gets most of its international revenue from Britain, Japan and Germany, does not break out sales from India. Revenue from a group of other international markets, including India, reached US$7.4 billion last year, or 6.9 per cent of total sales.

"The added investment reflects the success to date of Amazon in India, as well as a bright outlook for the e-commerce market in the region," said Mr Colin Sebastian, an analyst at Robert W. Baird & Co. "It's really down to a two- or maybe three-horse race, and Amazon clearly would like to be the winner."

Amazon, which debuted in India in 2013, has been spending to challenge local e-commerce companies Flipkart and Snapdeal. Mr Bezos said at a conference last week that Amazon is opening more distribution centres and doing more last- mile deliveries.

Mr Bezos in 2014 after committing US$2 billion to Amazon's India business.
Mr Bezos in 2014 after committing US$2 billion to Amazon's India business. PHOTO: AGENCE FRANCE-PRESSE

Mr Bezos highlighted achievements in India in his annual letter to shareholders. They included the roll-out of Seller Flex, which uses Amazon sellers' warehouses to store other products sold on Amazon, helping the company quickly expand its delivery capabilities.

Amazon's cloud-computing division is also developing new infrastructure in India.

"We have already created some 45,000 jobs in India and continue to see huge potential in the Indian economy," Mr Bezos said in a statement from the summit, where Indian Prime Minister Narendra Modi spoke to executives from US companies. "Our team is surpassing even our most ambitious planned milestones."

Mr Modi met US President Barack Obama on Tuesday and will address Congress this week.

Amazon has a long-term vision to be the primary middleman connecting factories in India and China with customers in the United States and Europe.

It is expanding its Fulfilment by Amazon service, which provides storage, parking and shipping for independent merchants selling products on Amazon's website, into a global logistics network, according to documents obtained by Bloomberg. India is a key country from which it can source goods directly and sell to its customers around the world.

Internet use in India is booming, with Web shopping set to make up 25 per cent of total retail sales by 2020, and the number of online shoppers is expected to top 175 million by then, according to a report by Google and AT Kearney.

"One of the top-level lessons is that we have done much more local market customisation in India than we did in China," Mr Bezos said at a conference last week.


A version of this article appeared in the print edition of The Straits Times on June 09, 2016, with the headline 'Amazon's $4b vote of faith in Indian growth'. Print Edition | Subscribe