Amazon local revenues: Amazon local revenues enough to fund India investments; on track for profitability: Amit Agarwal
“Our ecommerce business is generating enough revenues that allow us to make the desired investments into infrastructure and logistics,” he said.
Agarwal’s remarks follow Amazon’s commitment to raise its investments in India to $26 billion by 2030, announced by chief executive Andy Jassy after his meeting with Prime Minister Narendra Modi in June.
Agarwal, who was given additional responsibility of overseeing markets outside of India in March last year, said while a bulk of the Seattle-based technology major’s earlier investments in India went into building logistics and seller infrastructure, the newer investments are going into technology and services to bring more shoppers online. Since 2013, Amazon has invested around $6.5 billion in the ecommerce business here.
During his visit, Jassy had announced an investment of $13 billion for the company’s cloud business – AWS – in India.
Agarwal said that Amazon has a certain timeline and a certain set of milestones to turn profitable in India. “We are on track,” he added.
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“I think in the case of India, with hundreds of millions of customers who haven’t experienced shopping online, the cycle of investment will go on for a little bit, but you want to be in a state where you can sustain yourself,” said Agarwal.Amazon’s India marketplace unit, run by Amazon Seller Services, which is yet to turn a profit, reported an annual loss of Rs. 3,649.2 crore in fiscal 2022 – down 32% compared to the previous year. However, the unit did post a 32% jump in overall revenue to Rs 21,633 crore on a standalone basis.
Agarwal said Amazon was focussed on the long-term outlook for India, where it aims to build a service that is “loved by customers and is sustainable”. “We try not to optimise for short-term performance and take a long-term outlook,” he said. “We continue to think long-term in our investments. Recently, when we met Prime Minister Modi, we announced an expansion of our investment…across all our business. We remain excited about India, it’s a long-term opportunity and most of our growth is ahead of us.”
Much of Amazon’s investment now is on the services and technology side ‘to make it easier for the next 200 million customers to shop,” Agarwal said. “It is also to make your services faster for lower-tier pin codes.”
Competition, regulation and more
Over the last decade, the company has largely been competing with Walmart-owned Flipkart, but now faces growing competition from newer rivals such as Meesho, Tata Neu and Reliance’s Jio Mart.
“You would rather be in a segment where there’s competition. It means you’re doing something that people care about,” Agarwal said, underscoring the point that it was not necessary for someone to fail for others to succeed, given the nascent stage of online retail in India.
“We focus on what we can control – we can control the selection that we bring to the table, what we are doing to reduce the cost of operation for our sellers, to reduce prices and making sure they can offer fast and reliable deliveries. Those are the things that we care about and those are the things in which we continue to invest,” he said.
On Thursday, Amazon announced opening up its fulfilment infrastructure to sellers and D2C brands even if they aren’t selling on the platform. The company had launched smart commerce in May last year to allow offline retailers to set up online store fronts, besides opening up its own logistics network to third-party sellers.
“With the advent of D2C brands, there are those who prefer to sell on Instagram or their own websites, and we want to make sure that the capabilities that we have are available to them no matter where they intersect with the customers. So exposing our infrastructure and capabilities to sellers in different forms is a way for us to be a participant in the way they serve customers,” he said, explaining the rationale behind opening up its logistics infrastructure.
Agarwal is visiting India at a time when the centre is putting the final touches to its draft ecommerce policy, which is expected to be rolled out soon. Among the contours of the draft, there are clauses on how the government is planning to change the way marketplaces sell their private labels.
While he did not want to speculate on the ecommerce policy because it hasn’t yet been notified yet, the IIT-Kanpur alumnus said that at a broad level the policy should be focused on enabling growth, on more sellers coming online, while allowing for stability and continuity so that stakeholders can make longer term investments.
Weeding out the old
Amazon India is also in the process of phasing out one of its largest sellers, Appario Retail, following regulatory changes. It holds a stake in the parent firm of Appario Retail–Frontizo Business–through a joint venture with the Patni group. The company had announced in October 2022 that Appario will cease to be a seller on the platform within a year. The company also had to shutter the operations of its dominant retailer Cloudtail, which had been set up through a joint venture with N R Narayana Murthy’s Catamaran Ventures.
ET has been reporting that the transition process for vendors working with a new set of sellers has not been smooth in areas like payment settlement, among others. “In the case of Appario, we’ve renewed our partnership with them but under a different set of terms on how we think that relationship should progress,” Agarwal said.
It is “our job to provide capabilities to all sellers so that they can run their business effectively on Amazon,” he added, pointing out that there are 1.3 million sellers on the Amazon India marketplace.
Globally, Amazon has also undertaken one of its largest layoffs ever, impacting 18,000 jobs across the world, including around a thousand job cuts in India. The firm employs an estimated 100,000 people in the country across businesses like ecommerce, cloud and others.
Late last year, Amazon also shut down verticals like Amazon Foods, its local food delivery service meant to compete with the likes of Swiggy and Zomato, as well as its edtech venture Amazon Academy, as the broader economic downturn has come to weigh on its ambitions. At the same time, the firm has also launched other experiments in India such as Amazon Prime Air, its own air cargo network to speed up ecommerce deliveries.
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