While Flipkart and its founders complain of foreign competition while they comfortably build their companies for close to a decade on foreign money, Amazon looks in no mood to stop its relentless cash infusion into the Indian unit. As a result, the US ecommerce giant has reportedly invested Rs. 2010 crore (approx $300 million) in its India unit.
This is the single largest capital infusion in the company so far. The investment was made last month, and with this, the total amount invested in Amazon India now stands at over Rs. 7,000 crore, as per the regulatory filings.
According to a report from ETTech, Amazon India has spent around Rs. 1,000 crore in offering discounts and woo customers during the festive season sale on the platform in October. The person aware of the matter told ET that the company is losing around Rs. 600 crore every month and it will burn up around $1 billion this year to be at the pole position.
Commenting on the investment, Amazon spokesporson said:
We will invest what it takes to become the customers’ preferred choice in India, and are encouraged that we are India’s largest and fastest-growing ecommerce marketplace. In an industry reportedly flat or negative, Amazon India has continued to show remarkable growth of over 100% this year.
Notably, the investment is for the Amazon Seller Services and not for the other firm that it operates for logistics, wholesale commerce and payments. The company receives seperate investment for those businesses.
Interestingly, the new capital comes at a time when Flipkart cofounder Sachin Bansal and Ola’s cofounder Bhavish Aggarwal have said that Indian-origin startups need policy support to counter what they claim is “capital dumping” by foreign rivals.
After spending capital on infrastructure and setting up warehouses, Amazon is now spending money on customer acquisition. On the other hand, Flipkart, which spent a lot of money in 2015, can’t afford to do so this year. It is said to be in a process to raise funding round but is struggling to raise due to valuation markdowns. But, Amazon has nothing to worry as far as capital is concerned.
Amazon India has been aggressively expanding its offerings in the country. Earlier this year, it launched Amazon Prime premium subscription service and has recently launched Prime Video service in India. Further, the company has already tied-up with many content creators to make original shows for the Indian audience.
In order to increase its margins, Amazon has also launched its own private label brand named “Symbol”. The company is planning to launch around six new private labels in the coming months.
Following the aggressive spending, Amazon has started showing results. Amazon Seller Services’ turnover for the last fiscal rose 116% to Rs. 2,217 crore, higher than Flipkart’s Rs. 1,952 crore.