Amazon to invest $2 billion in India, a day after Flipkart’s $1 billion funding. Source-The Economic Times

A day after Flipkart announced raising $1 billion in funds, e-commerce giant Amazon on Wednesday said that it will invest an additional $2 billion in India to support its growth in the country. “After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations,” said Jeff Bezos, founder and CEO of Amazon.com.
“We see huge potential in the Indian economy and for the growth of e-commerce in India. With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India,” Bezos said. “At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales. A big ‘thank you’ to our customers in India – we’ve never seen anything like this,” he added.

Amazon has scaled up rapidly in the country since its launch in June last year. It now sells over 17 million products across 28 categories and hosts about 8,500 merchants on its marketplace. The company has heavily invested in logistics and marketing. It has created a network of warehouses across the country and earlier this week announced opening of five more warehouses in cities like Delhi, Jaipur and Ahmedabad. 

It has also launched a slew of customer service programmes, like next-day and same day delivery. These initiatives are bearing fruit with the company already catching up with the number two online retailer in the country, Snapdeal, in terms of sales. Both Amazon and Snapdeal have sold about $600 million (about Rs 3,600 crore) worth of products this year and are targeting $1 billion or Rs 6,000 crore sales this fiscal. Flipkart, the market leader, reached that milestone last fiscal. 

Meanwhile, Flipkart, which raised $1 billion from a group of investors including Tiger Global, Naspers and Singapore’s GIC, is the largest online retailer in the country. It reached $1 billion in sales last fiscal and, according to sources, is on track to breach the $3 billion mark this fiscal. And Flipkart now has a marketing budget that is in the millions of dollars. 

The seven-year-old company has so far raised over $1.7 billion in risk capital. In May, it sucked in $210 million led by Russian billionaire Yuri Milner’s DST Global a few days after announcing its acquisition of fashion portal Myntra for an estimated $370 million. 

“This funding ensures that Flipkart can now invest in building on the promise they have shown,” said Arvind Singhal, chairman of retail advisory firm Technopak.

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India’s biggest online retailer Flipkart sets a new benchmark, raises $1 billion in fresh funds

Flipkart will announce possibly as early as next week that it has raised over $1 billion (Rs 6,000 crore), the biggest ever fund-raising by an Indian e-commerce company, two people aware of the development said. Half of the amount will come from existing investors Tiger Gobal, Russian billionaire Yuri Milner’s DST and Accel Partners while the rest will come from several new investors.

Among those who are said to be interested in investing in India’s largest online retailer are Singapore’s sovereign wealth fund GIC and USbased investment firm T Rowe Price. With this latest deal, India’s biggest online retailer will have raised over $1.7 billion, valuing it at over $5 billion. “The deal is done,” one person said. “An announcement could be made in a week or two.” Abillion dollars in fresh funding is not just a first for the Indian startup ecosystem, but is also among the biggest fund raises globally this year. In June this year, Silicon Valley-based Uber raised $1.2 billion at a valuation of around $17 billion.

“This is the war chest to consolidate Flipkart’s position in the country — the sector needs long-term, patient investors who can back with big money,” said the second person. Flipkart did not respond to an email query on the developments. Flipkart is rapidly scaling up its operations as it competes with Amazon.in and homegrown competitor Snapdeal. Snapdeal raised further funds of $100 million (Rs 600 crore) in May from Temasek, BlackRock Inc.,Myriad, Premji Invest and Tybourne at an estimated valuation of $1 billion.

Amazon has been pumping money in its India operations and has rapidly expanded to over 25 product categories. It has launched customer service initiatives like next-day and sameday delivery ahead of competition and has embarked on a massive marketing campaign. Flipkart, which crossed $1 billion in sales in March and even acquired online fashion retailer Myntra in May, has also launched customer service initiatives like same-day delivery in multiple cities and at-home trials for certain fashion categories. As orders cross the 5-million-amonth mark, Flipkart will have to continue investing in its backend operations in a cutthroat market. The company, along with other players like Amazon and Snapdeal, is also continuing to discount heavily.

Since 2013, top global investors have competed to pump money into India’s online retail industry, which advisory Technopak estimates will expand from the current $2.3 billion to $32 billion (Rs 13,700 crore to Rs 1.9 lakh crore) in six years.

Over the past four quarters, ecommerce companies cornered 72% of the $1.3 billion (Rs 7,700 crore) that went into Indian technology companies across 266 deals, according to research firm CB Insights.

India’s e-commerce sector is on fire, especially after Amazon entered the country last June. With some of the biggest retailers in the world jostling to get a piece of action in India, e-commerce companies in the country are riding a wave. For instance, while e-Bay is banking on Snapdeal, both Amazon and Walmart are pushing aggressively to conquer what is fast becoming the last frontier for them.

“It’s crazy — but justifiable considering e-commerce in India has just hit the tipping point and companies with most Market share will reap the biggest returns,” said a top executive at one of the e-commerce companies.