India a drag on Amazon’s international losses, investments continue

E-commerce giant Amazon recorded second quarter losses from international operations, with India being a large player, grew fourfold to $724 million as it invested heavily in data centres and content to attract more customers to subscribe to its loyalty programme called ‘Amazon Prime’.

The world’s largest e-tailing firm has stepped up investments in India over $600 million, disclosed since January to setup data centres, improve logistics and payments, besides building local content for its Prime video service offered to its loyal subscribers.

Amazon is also investing more in local data centres to stream videos to the growing number of Prime customers with the company claiming a third of new customers were signing up for its loyalty programme. It is also building content – Inside Edge, the first of 18 Indian original series and bought rights for local movies to target customers in specific regions of the country.

Prime subscribers spend twice as much as regular e-commerce customers in the US, which could mirror in other markets such as India.

The data centres also help Amazon its cloud business by hosting applications of hundreds of business customers in India.

“We continue to invest in India. We’re very hopeful with the progress we’ve made with sellers and customers alike in India and we see great momentum and success there, so we continue to invest and we have some of our best people in that business,” Chief Financial Officer Brian Olsavsky said.

Amazon, which follows the January to December financial year, had posted operating losses of $135 million in the second quarter last year. In the January to March this year, it had posted losses of $481 million.

International sales jumped 17 per cent to $11.48 billion in the quarter on the back of growing business across geographies, including India.

For the quarter, Amazon grew its revenue by 25 per cent to $38 billion as it got more customers to shift online from traditional retailers. It saw quarterly income drop by 77 per cent and hinted that it could lose up to $400 million in operating profit during the current quarter.

India has been the forefront of Amazon’s investments, with founder Jeff Bezos having committed over $5 billion to conquer the country’s e-commerce market. It also is expanding at a time when rival Flipkart is looking at investors such as Softbank who have deeper pockets to invest over a longer horizon and look at profits. Amazon has sustained losses for over 20 years before it showed marginal cash profits this year.

Flipkart has closed talks to acquire smaller rival Snapdeal, which will help it bring Softbank as an investor. At the same time, the Indian market is turning into a three-cornered fight with Alibaba, the Chinese e-commerce firm entering the fray by investing in Paytm with its Paytm Mall.

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