Amazon doubles Flipkart’s bet, puts $2 bn down

Jul 31 2014, 01:43 IST
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PE investments into the e-retailing segment so far this year have come close to $1.8 billion. Reuters PE investments into the e-retailing segment so far this year have come close to $1.8 billion. Reuters
SummaryA day after Flipkart attracted a jaw-dropping $1-billion capital infusion from private equity investors...

A day after Flipkart attracted a jaw-dropping $1-billion capital infusion from private equity investors, rival Amazon said on Wednesday it would spend $2 billion in the Indian market.

While the timing of the announcement suggested it was a ploy to make the headlines—the firm didn’t say over what time this money was likely to be deployed or to what end—the pace of financial commitments to the Indian e-tailing space suggest there is no shortage of believers.

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PE investments into the e-retailing segment so far this year have come close to $1.8 billion, a market estimated at anywhere between $2.5 and $3 billion, but tipped to grow exponentially.

Rajan Anandan, managing director, Google, believes that from revenues of $4 billion, the industry could reach $40 billion in five years. “That is not possible without this kind of investment, and we will see lot more of this.”

Anandan predicts that ultimately there would be just 3-4 horizontal players. To be sure, it’s the potential growth that’s pulling in players like the $75-billion global giant Amazon whose founder and CEO Jeff Bezos’ “thank you” note was emphatic in its conviction that the country was on track to become the fastest among Amazon’s markets to clock $1 billion in gross sales. “We see a huge potential in the Indian economy and for the growth of e-commerce in India. At current scale and growth rates, India is on track to be our fastest country ever to a billion dollar in gross sales. A big thank you to our customers in India,” Bezos said in a press release, adding, “We have never seen anything like this.” India’s e-retailing market is tipped to hit $20 billion by 2020 or even sooner by some estimates driven by more than half a billion mobile internet users.

Industry watchers believe the stakes for Amazon are high given the e-tailer’s experience in China. “They lost a big fight in China when Alibaba won over them and don’t want a repeat in India. So, the announcement isn’t surprising. By our estimate, Amazon has invested between $350 million and 400 million in India so far,” Ashish Jhalani, founder of eTailing India, said.

According to Bezos, after the company’s first year of business in India, the response from customers and small- and medium-sized businesses has far surpassed its expectations.

Amazon’s overdrive in India includes setting up five new warehouses in Delhi, Chennai, Jaipur, Ahmedabad and

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