The Washington-based multinational technology giant, Amazon has recently announced to infuse INR 11,400 crore in its Indian unit i.e. Amazon India during Financial Year 2020 to recover from its tremendous loses incurred in the past year because of the COVID-19 pandemic.
According to reports, the money will be distributed across Amazon’s marketplace, wholesale business and payments platform units in India to strengthen its position in the boosting electronic commerce market of India.
In the past months, Amazon has invested a ton-load of money into its India operations to capitalise on the rapidly growing Indian digitisation opportunity. The company has been investing heavily in promotions, supply chain networks, logistics and infrastructure as it lures customers to shop online. Analysts expect this strategy to be the reason for the company’s losses this year, higher expenditure and low income.
According to the regulatory filings registered with the Ministry of Corporate Affairs (MCA), Amazon Seller Services, Amazon Pay, Amazon Wholesale and Amazon Transportation services, all Indian operations have recorded losses in Financial Year 2020 at INR 5,849.2 crore, INR 1,868.5 crore, INR 133.2 crore and INR 48.1 crore respectively, as reported by Live Mint.
When asked about the investments, an Amazon spokesperson commented that the company’s Indian operations continue to get funded for the long-term. These investments will enable Indians to enjoy the convenience of e-commerce services and other digital services offered by Amazon.
According to Anchal Agarwal from Tofler, a business intelligence platform, Amazon international have been funding their Indian operations to capitalise in long-term for the company’s expansion plans. She says that the company has entered into losses because of its increased spending on advertisements and promotions of its services, especially Amazon pay, the online digital payments service offered by the company. Furthermore, Amazon is also emphasising on expanding its Seller business in India which, according to the regulatory filings have grown about 40% in the Financial Year 2019-2020.
Jeff Bezos’ Amazon is in a constant battle with other dominant market players such as Walmart-owned Flipkart and Mukesh Ambani led Reliance Retail Ventures Limited. The competition becomes intense as all of these entities are heavily funded.
In this fiscal year, Amazon Internet Services which had previously recorded a net profit of INR 71 crore in Financial Year 2019 also dipped down into losses worth INR 20 lakh in Financial Year 2020, as mentioned in the regulatory filings.