Flipkart forces rival Amazon’s international losses to rise

By:Vandita Jadeja 2017-10-31

Amazon saw its International losses rise to $936 million in the third quarter which was largely driven by significant investments in India. The US based online retail giant reported the massive loss from its International business unit for the quarter ended September 2017. Brian T. Olsavsky, the Chief Financial Officer at Amazon said that this was due to the international expansion and the company is constantly adding benefits in India. It launched Prime a year ago and they had more Prime members join in India than in any other country within the first year of the launch.

The losses of Amazon from its International business has almost doubled in the past one year, it was $541 million in 2016 and $936 million in 2017. This shows that the company has been growing investments in India while trying to overthrow the local incumbent Flipkart as the top player. The company continues to burn money in order to undercut the cost of products to get more users to shop with it. Introducing new products and services has also drawn huge investment from the company. Amazon has earlier said that its major investment in India includes real estate. The company introduced Prime last year along with Prime Music, and Amazon Business is also expanding in India. Hence, there is a lot of investment in the country. The company has spent a significant amount on advertisement and introduction of new products.

Amazon’s ramp up of its investments in the Indian market comes after rival Flipkart raised $1.4 billion from eBay, Tencent and Microsoft which was followed by another round of $2.5 billion from Softbank earlier in the year. Amazon has invested about $1 billion in India in 2017 alone. Amazon sees India as a huge market in the future and hence is constantly investing in the country. However, with the international losses for a single quarter rising to about $1 billion, the company’s investment in India could be much more significant than earlier anticipated.

While this could be bad news for rival Flipkart, experts point out that Amazon’s burn through discounting has come down with the company potentially deploying more money on infrastructure and new services. Flipkart claims to have a war chest of $4 billion to take on Amazon and is working on its unique loyalty program which will rival Prime. But it will not merely offer free shipping like Amazon. The company is also currently investing in various categories like grocery which will draw huge investments in logistics. It also has a plan to make strategic investments in several smaller Indian Internet firms.

Alibaba has entered through Paytm Mall and is another large player for India’s online shopping space. Analstys expect that investments will soar as the global giants strive for a larger market share. India being the last untapped open market in the world makes it very important for all the large players. The market is expected to grow to $200 billion by 2026.

 

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