Online retailer Amazon to invest $2 billion more in India to support growth

Comes a day after local rival Flipkart announced a fresh round of funding worth $1 billion.

Amazon said it would open five warehouses across India in Chennai, Jaipur, Ahmedabad and Gurgaon, adding to the two it operates near Mumbai and Bangalore. Above, an Amazon warehouse in the UK. Simon Dawson / Bloomberg NewsShow less

US online retailer Amazon yesterday said that it plans to invest US$2 billion in its India operations to support its growth.

The announcement comes a day after the Indian e-retailer Flipkart raised $1bn from private investors.

“At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales,” said Jeff Bezos, the founder and chief executive of Amazon.com.

The India portal of Amazon features more than 17 million products from thousands of small and medium-sized businesses, according to the company.

In India, Amazon has added categories such as apparel, a store for Tamil books and a health section. It has also increased its vendor base, invested in building backend capabilities such as warehousing. On Monday, Amazon said it would open five warehouses across the country in Chennai, Jaipur, Ahmedabad and Gurgaon, adding to the two it operates near Mumbai and Bangalore.

The Indian e-commerce market comprises only 0.4 per cent – or $2.3bn – of the country’s overall retail sector, with brick and mortar stores accounting for the rest. But the e-commerce share is set to touch 3 per cent, or $32bn, by 2020, according to a report from the New Delhi-based retail consultancy Technopak this month.

Travel accounts for the largest e-commerce segment.

The top online companies in India are Flipkart, Snapdeal and Amazon.

“Currently, almost none of the mass-merchant players in the e-tailing space are profitable,” said Pragya Singh, an analyst at Technopak.

A relatively new market that is only taking shape now, the players are creating the ecosystem as they grow such as training vendors and smoothening logistical challenges.

“Besides, increased competitive intensity implies marketing and promotions costs remain high to drive scalability,” Ms Singh said.

The growing number of internet users and internet-supported devices have brightened prospects for e-commerce.

“The timing of [Amazon’s] announcement is getting much debated given it comes a day after Flipkart raising $1bn,” Ms Singh said. “The message is, however, clear. Amazon is a serious contender in the Indian market and will continue to invest in this business to scale up rapidly.”

Despite the competition, India is an attractive proposition for online retailers, including those from the UAE.

“Depending on how our business fares in the Gulf, I expect India to be our next big foray,” said Omar Kassim, the founder and chief executive of Dubai-based JadoPado.

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