Amazon doubles Flipkarts bet, puts $2 bn down

Written by fe Bureau | Bangalore | Updated: Jul 31 2014, 07:13am hrs
AmazonPE investments into the e-retailing segment so far this year have come close to $1.8 billion. Reuters
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 headlinesthe firm didnt say over what time this money was likely to be deployed or to what endthe 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, its the potential growth thats 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 Amazons 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. Indias 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-tailers experience in China. They lost a big fight in China when Alibaba won over them and dont want a repeat in India. So, the announcement isnt 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 companys first year of business in India, the response from customers and small- and medium-sized businesses has far surpassed its expectations.

Amazons overdrive in India includes setting up five new warehouses in Delhi, Chennai, Jaipur, Ahmedabad and Tauru on the outskirts of Gurgaon, in addition to the two existing ones in Mumbai and Bangalore, which will almost double the companys storage capacity to over half a million square feet.

Recently Amazon partnered with Catamaran Ventures, promoted by Infosys chairman emeritus NR Narayana Murthy, to offer services that help offline sellers and small businesses to get online and be a part of the swelling online customer base in the country. With the launch of the five new warehouses, Amazon plans to deliver products quickly, while achieving nationwide scale.