Amazon India is betting on a short-term lending model to fuel the growth of its quick-commerce brand, Amazon Now, without burning cash like many of its competitors in the segment, multiple executives aware of Amazon’s plans told Fe.
Financial Firewall
“Unlike traditional quick service players in India, Amazon is not looking to spend a lot of money to create inventory/stock at its dark stores; instead, Amazon is planning to offer short-term working capital loans to sellers to manage inventory for the company,” a senior executive from Amazon India said.
He added that Amazon’s focus is to grow its quick-commerce channels of the Amazon Now brand through partnerships with local wholesale vendors of fast-moving consumer goods, electronics and white goods in major cities in India.
Another executive aware of Amazon’s plans said that the world’s largest online retailer is planning to offer wholesale vendors short-term capital loans at rates lower than those offered by banks and non-banking financial companies in India.
“The short-term loans are being provided at anywhere between 6-13% annual interest rates, depending on the size of the vendor and its history of working with Amazon,” the second executive said.
Amazon did not respond to queries sent by FE till the time of going to the press.
Last week, Amazon India’s country manager, Samir Kumar, told FE that Amazon’s quick service model is inventory-light because sellers stock through Amazon’s micro fulfilment centres.
“Amazon doesn’t sell directly except for fresh produce. Customers clearly love quick commerce. When a product has customer love and scale, our responsibility is to make the model sustainable. That’s why I am optimistic,” Kumar told FE.
Scale & Selection
Kumar added that Amazon plans to be the market leader in the quick-commerce segment in India and is rapidly adding micro fulfilment centres in major cities in India.
“We are adding two dark stores every day and expect to reach 300 by year-end,” Kumar said.
Amazon is also planning to increase the variety of products offered on the Amazon Now brand to 50,000 products in the next two years and is banking on its short-term lending strategy to expand partnerships with both wholesale lenders and companies to grow its inventories.
“Most of Amazon’s short-term lending in India for the next few years will focus on the growth of Amazon Now’s distribution channels and variety,” the first executive mentioned above said. He added that Amazon is looking at city-specific strategies to offer products on the Amazon Now platform.
Last week, the Seattle-based company announced that it plans to invest over $35 billion in India by 2030. The new commitment adds to the $40 billion the company has already invested in the country since entering the market in 2010. The new investment will focus on three key areas: AI-driven digitisation, growth in exports, and job creation.
The world’s largest online retailer is also aiming to create 1 million job opportunities in India by 2030, even as it continues to cut roles at a global level. The company shared the plan at its Smbhav Summit in the Capital.
Amazon’s bullish stance on the growth of the quick-commerce segment is despite legacy players like Blinkit warning that the fast-growing quick-commerce sector is moving toward a period of correction as access to capital tightens and the limits of cash-burning driven expansion become clearer.
Blinkit CEO Albinder Dhindsa last week had said that the industry’s growth model, powered largely by continuous fundraising, is becoming unsustainable. Companies, he added, will soon be forced to confront how long they can continue operating with steep losses.