Cash-flush Flipkart forces Amazon’s international losses to soar

US-based online retail giant Amazon on Friday reported a massive $936 million loss from its international business unit for the three months ended September, which it said was primarily driven by the company’s investments in India.

“It is international expansion and primarily in India where we’re continuing to add benefits. And we launched Prime there a year ago, if you remember, and we’ve had more Prime members join in India than in any other country in the first 12 months,” said Brian T. Olsavsky, Chief Financial Officer at Amazon, in a call with investors and analysts.

Amazon’s losses from its international business have almost doubled in the past one year, from $541 million in Q3 last year to $936 million in the most recent quarter. The increase signifies Amazon’s growing investments in India where it is trying to overthrow local incumbent Flipkart as the top e-commerce marketplace.
While the company continues to burn money to undercut the cost of products in order to get more users to shop with it, bringing new products and services has also drawn significant investments from the company. Amazon has in the past has also said the other major investment in India includes real estate.

“We had the first Prime Day there (in India) this year, Prime Music, Amazon Business is also expanding in India. So, a lot of positive momentum and investment going on in India, very pleased with that. We also recently announced Echo and Alexa are available in India,” added Olsavsky.

Amazon’s massive ramp up of investment in India comes after rival Flipkart raised $1.4 billion from Tencent, eBay and Microsoft followed by another $2.5 billion from Softbank earlier this year. Studying regulatory filings made by Amazon’s many Indian arms, it’s clear that the company has brought in investments in the tune of $1 billion into the country in 2017 alone.

However, with its international losses for a single quarter rising to nearly $1 billion, Amazon’s investment in India could be far more significant than anticipated earlier. While this could spell bad news for Flipkart, industry watchers point out that Amazon’s burn through discounting has reduced, with the company potentially deploying more money on infra and new services.

Flipkart, which claims it has a war chest of $4 billion to take on Amazon, is working on its own loyalty programme that will rival Prime, but says it will not merely offer free shipping like Amazon does. The company is also investing in categories such as grocery which will draw significant investments in logistics, apart from a plan to make strategic investments in several smaller Indian Internet firms.

With the entry of Alibaba as another large player (through Paytm Mall) in India’s online shopping space, analysts expect investments to soar as these global giants try to fight it out for supremacy. India being the last large untapped open market in the world makes it extremely important, with Morgan Stanley expecting the market to grow to $200 billion by 2026.

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