Amazon says India investments paying off, but drain on global margins

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Bengaluru: Amazon, which on Thursday reported quarterly profits that fell short of Wall Street expectations, indicated that its India investments are starting to show results despite being at an early stage and would impact international margins as it plans to go all-out to conquer the all-important internet market, amid a bruising battle with local rival Flipkart.

In a post-earning conference call with investors, Amazon.com chief financial officer (CFO) Brian T. Olsavsky said that the company was excited about its investments in India and the response it had received from customers and sellers.

“We’re also investing in digital content and additional Prime benefits, fresh location Prime Now. But by far the biggest individual thing is the investment in India that we continue to make and very excited about it, the initial reaction in India from both the customers and also sellers,” said Olsavsky.

Amazon’s finance chief also indicated that the company would continue to add resources to India. Over the past two months, Amazon has outsold Flipkart in terms of monthly sales, Mint had reported in September. Including sales from Myntra and Jabong, Flipkart continues to be ahead of Amazon.

“So what you’re seeing essentially in the second half of this year is a step-up investment primarily around digital content and also the fulfillment center investment, but also things like Echo and Alexa which we’re adding a lot of resources to, India and AWS as we add people there to support additional service, think rapid growth in that business,” Olsavsky said.

Amazon, which plans to launch its Prime video platform in India soon, said the company was very encouraged by the performance of Prime in India.

“We’re in four countries right now (with video), the US, the UK, Germany and Japan. And we have stated that we will be in India soon. So the content that we are creating, especially through Amazon Studios, we are generally holding the worldwide rights to and can use that in other countries as well,” said Olsavsky.

“So we are very encouraged by what we’re seeing in India but it is certainly very early on still. Most recent highlights would be the launch of the Prime program in India this past quarter. It’s now one of the top selling units based on Amazon.in. And so it’s very been very well received by customers. It’s hard to compare India to any other country. It’s very different in its stage and structure. Being a third-party market has caused a lot of invention on our side,” he added.

Mint reported on Thursday that Amazon’s India business, which is aggressively expanding its fashion and consumer products categories, plans to unveil its global programme for start-ups called Launchpad in India within the next two months.

“We’re being creative. The team there in India has been very creative on whenever they find a roadblock or something that has not existed in another country, they create it themselves, whether that’s from delivery stations to working with small merchants to, you name it. So we’re very happy with both the customer engagement that we’re seeing and also the seller engagement which is very important in India and very pleased with the team that runs it over there and the way they work with teams throughout the world,” said Olsavsky.