Amazon will continue to invest heavily in India says Amit Agarwal
01st Nov’ 2016. Bengaluru: Amazon.com Inc. will continue investing heavily in India, the chief of its local operations said, dispelling concerns of slower spending by the US e-commerce company after its chief financial officer Brian Olsavsky said last week that while the India investments were starting to show results, they had hit margins, contributing to lower-than-expected results in the third quarter.
“Not at all,” Amazon’s India chief Amit Agarwal said in an interview on Monday when asked whether Amazon would slow down investments in India. Amazon, which initially said it would invest $2 billion in India, had said in June that it would invest an additional $3 billion in the country.
That investment is on track, Agarwal said, adding that the company is “excited about the momentum that we see in India”.
“India is very early in its e-commerce trajectory. Amazon is very early in its e-commerce trajectory in India. To transform how India buys is going to take a long time; it will take a lot of investment and… for many years. This is just the beginning.”
Amazon is betting big on its Prime service in India and expects the loyalty programme to dominate sales in the coming months.
“Prime continued to be the top seller in all of October, not just for wave one (of the Great Indian Festival). Prime membership continues to be a top seller and it is going to be so going forward every month. My belief is that Prime membership will be the top seller every month based on the trends that we are seeing,” said Agarwal.
On Monday, Amazon also said that it witnessed record numbers during its month-long Diwali sale event, the Great Indian Festival, with sales jumping 2.7 times from last year.
This year’s Diwali sale has proven to be the biggest showdown in the history of Indian e-commerce, with Amazon India and rival Flipkart going all out to woo shoppers.
While Flipkart claimed to outsell Amazon India during the first leg of the sale season, Amazon claims it came back strongly during the latter half of the sale season, with bigger discounts in key categories such as smartphones and large appliances.
“October this year for us was 2.7 times of last year’s October—which is incredible because last year was 4 times the October before,” said Agarwal, adding that this growth came even as “conversations” suggested growth in India’s e-commerce business was going to be flat.
Agarwal said that October could be an inflection point for e-commerce in India. “We had categories from phones to Amazon Fashion to appliances growing three to 11 times; even newer categories such as luxury and beauty grew 46 times; grocery and everyday consumables, 7.1 times; furniture, 11.8 times; gold jewellery, eight times—so a lot of these categories are showing robust growth.”
Agarwal said that 70% of the company’s new customers in October came from tier-II and tier-III cities, adding that it was confident of carrying the momentum from its Diwali sale well into November and December.
Mint couldn’t independently verify the numbers, but, in general, all e-commerce marketplaces (including Snapdeal, Amazon and Flipkart’s smaller rival) did well in October, carrying forward their momentum from their annual sales.
“When I look at the gaps between the waves, our growth rates in those gaps continued to the same extent. We’re growing at 150% year-over-year. At peacetime, the growth rate is still what I’m telling you. And as we exit out of wave three (the third sale event in October), we don’t see a slowdown,” Agarwal said.
“The broader e-commerce story is not just a Flipkart-Amazon battle. Of course, both Flipkart and Amazon are trying to get a fair share of the pie in key categories such as electronics, fashion and large appliances. And despite drags on margins, nobody is going to reduce investments in India. What you will see, however, is that they will focus on innovation. For example, during the festive season, smartphone sales shot up and a lot of the sales jumped due to things like product exchanges. Another new innovation was something like Amazon Prime. So, you’ll see a lot of that going forward,” said Sreedhar Prasad, partner-e-commerce at KPMG.