Amazon Plans $3 Billion India Investment
June 08 2016 - 12:10AM
Dow Jones News
Amazon.com Inc. plans to invest an additional $3 billion into
India, which is emerging as a critical area of growth for the
e-commerce giant.
Chief Executive Jeff Bezos announced the plan at a meeting of
business leaders Tuesday with the Indian Prime Minister Narendra
Modi in Washington. Amazon sees "huge potential in the Indian
economy," Mr. Bezos said in a statement.
The announcement brings Amazon's total planned investment in
India to $5 billion, since it announced a $2 billion infusion in
2014. An Amazon spokesman declined to provide details such as how
the new funds would be allocated or over what period.
Amazon operates a pure marketplace in India, due to local rules,
selling only goods offered through its website by third parties. It
nonetheless has warehouse and delivery technologies there that are
particularly attuned to the local market, where internet
connectivity can be spotty or nonexistent and many consumers don't
have credit cards.
At the technology-focused Code Conference in California last
week, Mr. Bezos said Amazon does most of its own deliveries to
customers' doors in India, in contrast to the U.S. where it relies
heavily on the U.S. Postal Service, United Parcel Service Inc. and
others.
"We're adapting to the local model," Mr. Bezos said at that
conference, noting Amazon has smaller and more numerous warehouses
than other markets. In China, Amazon didn't sufficiently model its
business to suit local preferences, he said, and the company has
struggled to gain market share there.
Overall, Amazon's international segment, which includes all
markets outside North America, is growing much more slowly than its
home base. Overseas sales rose 5.7% in 2015 to $35.4 billion,
compared with 25% in North America to $63.7 billion. Amazon also
logged a $91 million operating loss abroad, compared with a $2.75
billion operating profit in its home market. Amazon doesn't break
out results by country.
Amazon said last summer it planned to open a data center in
India to serve what it said were tens of thousands of customers in
the world's second-most populous country.
Amazon faces competition in India from local startups Flipkart
Internet Pvt., which was valued at $15 billion as of last June, and
Snapdeal.com, with a valuation of about a third of that, according
to Wall Street Journal data.
Amazon's planned investment is especially large in comparison to
India's still tiny, but rapidly growing online shopping market.
Indians bought $16 billion worth of goods online last year, up from
$6.3 billion a year earlier, according to Morgan Stanley
estimates.
Amazon is injecting cash into its Indian arm at a time when its
local competitors have found it difficult to raise cash. Investors
have tightened the purse strings in recent months as startups
burned through millions of dollars every month funding deep
discounts on everything from smartphones to religious idols. In
response, local e-commerce companies have reined back on discounts,
laid off workers and reneged on offers to new hires in an attempt
to start making a profit.
Sean McLain contributed to this article.
Write to Greg Bensinger at greg.bensinger@wsj.com
(END) Dow Jones Newswires
June 07, 2016 23:55 ET (03:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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