Amazon targets India growth with a $3 billion investment
June 8, 2016 08:41 AM
(Bloomberg)--Amazon.com Inc. will invest $3 billion more to build its business in India, stepping up its bet that the country will become a major online-shopping market that will fuel sales growth.
The latest commitment, unveiled by Chief Executive Officer Jeff Bezos at the U.S.-India Business Council’s Leadership Summit in Washington, more than doubles Amazon’s total pledged investment since 2014 to $5 billion.
Amazon, No. 4 in the 2016 Internet Retailer Asia 500, has targeted India for international growth after pulling back from China due to fierce competition from that country’s e-commerce giant Alibaba Group Holding Ltd. In addition to seeking new customers, Amazon is also looking in India for new inventory to sell globally. Amazon, which gets most of its international revenue from the U.K., Japan and Germany, doesn’t break out sales from India. Revenue from a group of other international markets, including India, reached $7.4 billion in 2015, or 6.9% 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 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. Bezos said at a conference last week that Amazon is opening more distribution centers and doing more last-mile deliveries.
Bezos also 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,” Bezos said in a statement from the council, where Indian Prime Minister Narendra Modi spoke to executives from U.S. companies. “Our Amazon.in team is surpassing even our most ambitious planned milestones.”
India’s Modi met with President Barack Obama Tuesday and will address a joint meeting of Congress this week.
Amazon has a long-term vision to be the primary middleman connecting factories in India and China with customers in the U.S. and Europe. Amazon is expanding its Fulfillment 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 on track to make up 25% of total retail sales by 2020, with the number of online shoppers topping 175 million by then, according to a report by Google Inc. and AT Kearney Inc.
“One of the top-level lessons is that we have done much more local market customization in India than we did in China,” Bezos said at a Recode conference last week. “In China we did some local market customization but we mostly tried to roll out what had worked well for us in Japan, Germany, U.K., Spain, France, Italy, the U.S., etc., and it needed more local market customization.”