PM Watching, Bezos Flashes Wallet

Amazon announced a massive top-up for its India investment, mounting pressure on homegrown rivals Flipkart and Snapdeal and putting on notice China's Alibaba which looks poised to be a major rival in one of the world's most lucrative retail battlegrounds.
Amazon founder Jeff Bezos made the big announcement of a further $3-billion investment in the presence of Prime Minister Narendra Modi, for whom canvassing foreign investment from American companies has been an important agenda. For Bezos, having Modi in the audience in Washington DC while promising more money for his Indian operations is a clever move that could help him score points at the highest level of government as Amazon lobbies for easier foreign investment regulations in online retail.
Modi also had a separate meeting with Bezos in Washington.This was after a roundtable with top CEOs in which Bezos was present along with 22 other chief executives.
The PM later presented the USIBC Global Leadership Award to the Amazon CEO. India does not allow foreign direct investment in companies that stock inventory and sell directly to customers, something that Bezos wants changed. Two months ago, while clarifying its stand on guidelines for ecommerce companies, the government put fetters on discounting and emphasised that online retailers are marketplaces, and not merchants themselves.
Coming nearly two years after the Seattle-based online retail giant announced plans to invest $2 billion, the announcement takes the total commitment to India to $5 billion, which is more than the combined capital raised by both the main local rivals. While Flipkart has raised over $3.2 billion, Snapdeal has mobilised around $1.5 billion.
The promise from Bezos comes just days after ride-hailing app Uber said that a “significant portion“ of the $3.5-billion it raised in its most recent funding round would be deployed in India, demonstrating the lure of the market for global internet commerce companies.The Internet and Mobile Association of India, an industry lobby group, estimates that the ecommerce market will be worth Rs.2.1 lakh crore by December 2016, growing nearly 68% in just one year.
“Our aspiration is to transform how India buys and sells,“ said Amit Agarwal, the managing director of Amazon India. “Amazon.in has surpassed even our most ambitious milestones.“A part of the money , he said, will be used to make investments that will improve efficiency among its sellers, so that these gains can be passed on to customers.
Winning India will come at a price for Amazon, which has been outspending its rivals two-to-one in recent months. Amazon India had a burn rate of $70 million in December 2015 compared with $50 million in September 2015, said a person directly briefed on the matter. During the last festive season and earlier this year, the monthly burn rate may have increased to as much as $90-100 million, according to several people in the industry who track Amazon closely .
Amazon has also invested in home services provider Housejoy, financial comparison service BankBazaar and gift card startup QwikCilver.
Flipkart, India's largest online retailer, has reduced its burn rate to $45-50 million a month, investors directly aware of the company's operations said. Flipkart too declined to speak about financials. Experts said that after losing out to Alibaba in China, winning the Indian market has become critical for Amazon.
Amazon, which launched India operations in 2013, has stepped up the pace of investment in the last two quarters. The main India unit, Amazon Seller Services, has received Rs.8,618 crore since the beginning of 2015 and over Rs.9,600 crore since it was set up.

No comments: