Amazon invests $2 billion in India to remain competitive

July 31, 2014

Amazon has invested $2 billion into its Indian division in order to remain a player in the region's online retail market. This one day after India's largest online retailer, Flipkart, revealed a $1 billion funding round from new and previous investors.

Amazon has invested $2 billion into its Indian division in order to remain a player in the region’s online retail market. This one day after India’s largest online retailer, Flipkart, revealed a $1 billion funding round from new and previous investors. 

Flipkart’s goal is to become the mobile e-commerce retailer of the future and the company expects the largest single funding round ever by an Indian internet company to help with that, noted Forbes. The investment total was so large that Flipkart is now among the Facebooks and Ubers of the world – companies that have had funding rounds worth $1 billion or more. The valuation of the company is vague, but has been placed anywhere from $5 billion to $7 billion.

Flipkart offers consumers over 70 categories of products, according to The New York Times. Of India’s 250 million internet users, 22 million are registered with Flipkart and the site receives more than 4 million visits per day. Since its 2007 founding the company raised over $770 million, prior to the latest investment. Investors have included DST Global, Iconiq Capital, Accel Partners and Morgan Stanley Investment Management. The latest funding round was co-led by past investors Naspers and Tiger Global. 

In 2013, the Indian e-commerce market was worth $13 billion, and is expected to reach $76 billion by 2021, according to CNN-IBN News. However, the media outlet reported, that only $1.6 billion was spent on retail goods, and that the bulk of e-commerce purchases in India in 2013 were travel-related.

The Indian e-commerce market has been expanding rapidly, explained the New York Times. Last year international investors infused the market with a significant amount of cash, and since then the growth has continued. In the past few months at least six Indian e-commerce companies have announced major founding rounds, including Flipkart’s largest Indian rival, Snapdeal. 

Amazon’s fight for a stake of the online retail market in India
Amazon entered the Indian e-commerce market in June of 2013, and has remained competitive in the region through intensive advertising, new product categories, next day deliveries and lower prices, CNN-IBN News noted. Flipkart was founded by two former employees of the e-commerce website. 

In India, laws preventing foreign direct investment in multibrand retail companies have prohibited the retail giant from selling directly to consumers, reported The Wall Street Journal. However the website has allowed small and medium-sized businesses to use its website, logistics network and warehouses in order to distribute goods to customers. The online retailer has two warehouses, in Mumbai and Bangalore, and has plans for five more it announced Monday. 

The five new warehouses will be located in Delhi, Chennai, Jaipur, Ahmedabad and Tauru, reported The Economic Times. These fulfillment centers will almost double the online retailer’s physical presence in the country, expanding to over half million square feet. The goal is to provide the small and medium businesses who have partnered with Amazon a national platform from which they can distribute their goods. 

“The launch of the five new fulfillment centers is part of our continued investment in providing reliable delivery and enabling sellers to achieve nationwide scale.” Amit Agarwal, vice president and country manager, Amazon India, said in a press release. 

Amazon CEO Jeff Bezos expects that India will be the company’s fastest country to reach $1 billion in in gross sales. 

“After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations,” said Bezos in a press release according to IBN-CNN News. “We see huge potential in the Indian economy and for the growth of e-commerce in India. With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India.”

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