Amazon’s $2 billion bet against Flipkart $1 billion

Bengaluru: It’s raining billions in the Indian online retail space. A day after India’s biggest e-tailer Flipkart said it had drawn in a billion dollars more in funding, Amazon.com on Wednesday announced that it would pump in $2 billion into its Indian operations. The announcement came from no less than the e-commerce giant’s founder and CEO Jeff Bezos himself, signifying how important winning in India is for the American company.

“With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India,” Mr Bezos said in a statement. “At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales.” Amazon.com lost the huge and rapidly growing China e-commerce market to that country’s Alibaba.com.

Mr Bezos clearly does not want a repeat of that in India, at least not to his two former employees, Sachin Bansal and Binny Bansal, Flipkart’s founders. “Bezos probably has it written internally somewhere that Amazon does not want to lose the battle in India as it did in China”, said Ashish Jalani, CEO of eTailing India, an e-commerce consultant.

“The investment was probably already in Bezos’ plan, but he chose to make it public today to send out a message, ‘we are not going to be sitting quietly in India’”. Amazon has deeper pockets, but Flipkart has the first-mover advantage and local knowledge on its side. It has over 20,000 sellers in its marketplace, about three times what Amazon.in currently has, and is ahead in warehousing, although the latter will catch up rapidly.

“Amazon’s biggest challenge will be to learn the Indian customer and nuances,” Mr Jalani said, but it already scores on the seamless online buying experience and has greater brand attraction.

In the year since it launched its India website, Amazon has taken on Flipkart by ramping up on product categories, slashing prices, launching same-day delivery, and a high-voltage advertisement campaign.

Both Flipkart and Amazon are primarily going to be investing in building up infrastructure, recruiting thousands more sellers to their platforms, and hiring engineering and business talent as the battle moves increasingly from the personal computer to the mobile arena.
Amazon said it would build five new warehouses across the country to support its fast ‘fulfilled by Amazon’ delivery service.