As Amazon battles Flipkart; its international losses swell to $3 bn in 2017

Amazon India
US retail giant Amazon’s International losses swelled to over $3 billion in the year 2017 as the company stepped up its investment in India to counter rival Flipkart which roped in investors such as Tencent and Softbank during the year.

Amazon’s international losses have become a metric to gauge how the company’s investments in India are growing, as it has admitted in the past that India was the most significant contributor to this. In 2016, the company’s international losses stood at just $1.3 billion, less than half of that in 2017.

Documents filed with the Registrar of Companies shows that Amazon Seller Services, the e-commerce arm of Amazon in India, had raised Rs 62 billion ($1 billion) of capital in the year 2017. This does not include investments Amazon makes into its cloud and payment arms in the country.

While the company is undoubtedly stepping up investments in India to counter Flipkart, a large portion of its investment is going into Prime, the loyalty programme with which it expects to rule India. Amazon said that the growth of Prime in India during its first year has been the highest it has recorded anywhere in the world.

“India continues to be a good story for us. We feel that it's had a lot of growth in the past year. In fact, more Prime members joined India's Prime program in the first year than we've seen in any other country in the history of the world, our world,” said Brian Olsavsky, Chief Financial Officer at Amazon, during a call with analysts on Thursday.

He added that Amazon’s selection of Prime eligible products in India had grown to 25 million in the span of little over a year since the service was launched in the country.

Flipkart had raised a mammoth $3.9 billion in funding during 2017 from two rounds and brought onboard investors such as Tencent and Softbank. The Economic Times recently reported Amazon’s biggest competitor Walmart was also close to picking up 15-20 percent stake in Flipkart, a move which could give it a boost in the grocery category.

With competition heating up in the e-commerce space, it is expected that Amazon’s investments in India will continue to grow. Amit Aggarwal, head of Amazon’s India business had told Business Standard in an interview that despite CEO Jeff Bezos making a commitment to invest $5 billion into India, he would not hold back investments based on that figure.

He had added that nearly half of the investments Amazon has made in India so far has gone into infrastructure, including warehouses and sort centres, making its logistics arm the largest in the country.

Experts have opined that while Amazon is suffering massive losses through its Prime programme in India, it is building loyalty among customers. Flipkart, on the other hand, has struggled to build such a programme and there’s a fear that once the discounting taps are closed, customers will flock to other platforms to make purchases.

Amazon on Thursday reported a profit of $1.86 billion on a revenue of $60.45 billion for the fourth quarter. The company’s revenue beat Wall Street expectations growing by 38.2 percent on a year-on-year basis.