Seattle-based e-commerce behemoth Amazon, is infusing about USD 630 million in three of its India businesses—Amazon Pay, Amazon Seller Services, and Amazon Retail to compete with its local competitor Walmart-owned Flipkart, according to a local media Economic Times.
It plans to invest USD 479 million in Amazon Seller Services (e-commerce), USD 127 million in Amazon Pay (digital payments unit), and USD 24 million in Amazon Retail (food retail business).
The fresh round of investment comes at a time when the Jeff Bezos-owned India business has losses standing at USD 986 million in FY 2018-19, according to regulatory filings sourced by ET.
Amazon Seller Services, got the largest chunk of the India investment due to the intense cash burn on account of deep discounting, promotions, and marketing expenses it incurs. Amazon Pay India with a fresh USD 127 million war-chest will take on Flipkart’s PhonePe, Alibaba-backed Paytm, and Google Pay. The investment in Amazon Retail, its food division, is in preparation to keep its direct competitor Flipkart’s newly launched grocery unit FarmerMart at bay.
Incidentally, the investment in Amazon Retail coincides with Flipkart’s application seeking food license from the government for Flipkart FarmerMart. It plans to pump nearly USD 352 million in its food retail unit. The funding will be used to expand its supply chain, storage, and logistics in the country.
“We’ve secured all internal approvals for the same already. This newly registered local entity Flipkart FarmerMart Pvt. Ltd. will focus on food retail and is an important part of our efforts to boost Indian agriculture as well as food processing industry in the country,” Kalyan Krishnamurthy, group CEO at Flipkart, had said in a press statement.
It intends to learn the trade secrets from its parent company Walmart, that already runs a cash-and-carry business in India and has partnerships with farmers across the country. It will be interesting to see how the two build new capabilities to outdo each other in India’s online grocery market that is projected to reach USD 17.40 billion by 2022.
“We have built sourcing and delivery capabilities for food as varied as dry grocery, packaged foods, fruits, vegetables, protein foods, dairy and other frozen products. We are gearing up for setting up a collection center for sorting, grading and packing fruits and vegetables. It will be sourced directly from farmers across India,” states Amazon Retail India in its regulatory filing.
Amazon and Walmart are investing millions of dollars in their Indian businesses to strengthen their market leadership and also prepare for the entry of Reliance Industries in this space which plans to invest USD 24 billion towards a digital services company.