With the recent infusion of Rs 1,950 crore ($306 million), Amazon has pushed its record capital into India this financial year. Amazon Seller Services has received Rs 8,150 crore (about $1.3 billion) so far in 2017-18 from its U.S. parent, according to filings submitted with the Registrar of Companies. This is the fourth time Amazon has pumped in capital infusion since domestic rival Flipkart raised Rs 25,380 crore (about $4 billion) around the middle of last year.
Amazon India’s online marketplace is spending $120 million every month — $75 million on ecommerce and $45 million on its Prime subscription service. This is much higher than its average monthly cash burn rate of $80-100 million in 2016, the Economic Times reported citing experts.
“Amazon’s (cash) burn is increasing due to push in three categories — smartphones, fashion and grocery,” Satish Meena, senior forecast analyst at Forrester Research, was quoted as saying by the publication. “As its burn increases, it will see more infusions. In fact, 2018 will see both Flipkart and Amazon spending a lot on offline strategies.”
Amazon pumped in Rs 2,900 crore in Amazon Seller Services in November last year, which made it the single biggest capital infusion into its India marketplace. So far, Amazon has put in $3 billion of the $5 billion that was committed by founder Jeff Bezos for investing in India. Amazon India’s subsidiaries — Amazon Wholesale, Amazon Pay, Amazon Transport and Amazon Data Services — have received a combined Rs 2,868 crore since 2016. These funds are being used to enhance infrastructure, consumer and seller experience.
“We remain committed to our India business with a long term perspective to make ecommerce a habit for Indian customers and to invest in the necessary technology and infrastructure to grow the entire ecosystem,” an Amazon India spokesperson said, PTI reported.
In contrast, Flipkart’s total investment in its marketplace, Flipkart Internet Services, is at Rs 8,349 crore so far. While the domestic e-commerce giant has not made any recent infusions into its marketplace, it is trying to catch up with Amazon logistically as the latter has aggressively increased its infrastructure by expanding the number of its delivery centers to 41 across 13 cities in India.
In 2018, grocery is one category where the competition is expected to get heated, with Amazon India’s establishment of Amazon Pantry and its delivery service Amazon Now. Flipkart, on the other hand, is set to expand its grocery service to six cities, while Alibaba and Paytm Mall are looking to invest in BigBasket, India’s largest online grocer.
Industry watchers feel that Amazon has an edge over its competitors. “Amazon’s strategy is probably to starve their competitors to death, and so they’ll keep a steady state of marginal profitability, or unprofitability, that they know they can sustain for the next 10-20 years with the belief that at some point there’ll be massive capitulation,” Chamath Palihapitiya, the co-founder of venture fund Social Capital, told the Times of India.