Amazon’s India Business Grows Four-Fold
Amazon India said on Friday that its sales grew more than fourfold in the June quarter, showing that the local unit of the US-based online retailer is gaining significant market share in its high-stakes e-commerce war with Flipkart and Snapdeal.
The company’s sales—net of discounts, product returns and taxes—surged more than 300% in the fiscal first quarter compared with the year-ago period, an Amazon India spokesperson said in an emailed statement to Mint, without specifying a sales number. In the same quarter, unit sales at Amazon India surged more than 500%, it said.
While Flipkart remains much bigger in overall size, Amazon India’s numbers indicate it grew much faster in the quarter gone by. The company is also fast catching up with Snapdeal, owned by Jasper Infotech Pvt. Ltd.
Flipkart, India’s largest e-commerce firm, said on Monday that its unit sales have risen 150% so far in 2015, compared with the year-ago period. Snapdeal reported an increase of 222% in gross merchandise value (GMV) in the April-June quarter. GMV refers to the value of goods sold on a site, but does not account for discounts or even product returns.
The sales growth numbers also highlight a key part of Amazon India’s customer acquisition strategy: lure shoppers with lower-priced products such as books, and then sell smartphones and other costlier products to them.
On the other hand, over the past year, Flipkart and Snapdeal have increasingly shifted their focus towards higher-priced products such as smartphones and home appliances.
Amazon India’s market share gains make the forthcoming Diwali period all the more important. E-commerce firms generate more than half their annual sales in the October-December quarter, when Indians splurge on all kinds of products during Diwali and other festivals.
Online retail sales could touch anywhere between $48 billion and $60 billion (between Rs.3.1 trillion and Rs.3.9 trillion today) by 2020 from $4.47 billion last year, according to an April report by financial services firm UBS.
“E-commerce companies are creating all kinds of sales events throughout the year, apart from the bumper sales in Diwali, so these sales events in the coming months will be key,” said Harish H.V., partner at Grant Thornton, a consultancy firm.
“To compete better with a tech powerhouse such as Amazon, local companies will have to improve significantly on two counts. One, they need to have better tech, including things such as data analytics, to be able to reach the right customers. Two, improve customer satisfaction efforts by providing a better experience on the desktop and app, by offering fast delivery services and by having quality products,” he added.
Since launching in June 2013, Amazon India has spent hundreds of crores of rupees on marketing and adding tens of thousands of sellers.
The company said it offers more than 30 million products. Flipkart also has more than 30 million products on its platform, while Snapdeal has more than 12 million.
Separately, Amazon has already pumped in as much as Rs.3,415 crore into its Indian unit, barely a year after its chief executive officer Jeff Bezos promised to invest $2 billion in India over time, regulatory documents show.
Amazon Eurasia Holdings and Amazon Asia-Pacific together invested the money in Amazon Seller Services Pvt. Ltd, the Indian unit of Amazon, in four instalments since July 2014, documents with the Registrar of Companies show.
This means Amazon India still has access to more than $1.4 billion in funds from its parent company from the planned investment of $2 billion.
Over the same period, Flipkart raised $1.7 billion and will soon receive another $600-800 million in fresh capital, while Snapdeal received roughly $800 million and is in advanced talks to raise another $500-600 million, according to previous report.