Breaking News:-

Amazon doubles losses to Rs 3,572 crore in financial year 2016

Amazon's losses in India more than doubled to Rs 3,572 crore during the twelve months that ended March 2016 as it stepped up its investments to dethrone local rival Flipkart as the top retailer in the country.

The Seattle-based e-commerce platform's losses in India jumped up from Rs 1,724 crore in the year ago period, while revenue more than doubled to Rs 2,275 crore, up from Rs 1,022 crore in financial year 2014-15. The figures are from documents filed with the Registrar of Companies reviewed by Livemint.

According to the documents, the company also increased its authorised share capital to Rs 16,000 crore, an increase of over four times in the past 12 months, and its paid-up share capital to Rs 9,629 crore. The move show's Amazon's will to win in India, the last large open global market.

Amazon attributes its huge growth in losses to spending on infrastructure, new fulfilment centres and on technology. It also said it is spending on launching new products and services for its customers and sellers in the country. Amazon launched its loyalty service Prime ahead of the festive season and launched its video streaming service in December - both of which are said to have drawn heavy investments.

All three large e-commerce players in India also incur huge losses due to discounting of products on their platforms, and this is expected to be one of the top sources of Amazon India's losses. Under the Department of Industrial Policy and Promotion guidelines for foreign direct investment (FDI) in e-commerce marketplaces, players aren't supposed to regulate the price of products sold.

Unlike its Indian rivals Flipkart and Snapdeal, Amazon is using its global balance sheet to fund its expansion in India, meaning profitability isn't a top focus. This puts the company at an advantage against its rivals who have to rely on external investments, forcing Flipkart co-founder Sachin Bansal to recently cry foul and demand that the Indian government curb Amazon's dollar-fuelled growth in the country.

Amazon has so far committed $5 billion to India with the effect of its investments in the country showing up on its global balance sheet for the first time. In the quarter that ended September, Amazon reported a $541 million dollar loss from its International businesses, largely due to the investments it is making in India.

The company's aggressive spending and deep discounting isn't just affecting large rivals Flipkart and Snapdeal but also smaller players such as Voonik, Zivame, Koovs, Lime-Road, StalkBuyLove and Craftsvilla, who play in the online-fashion space that usually yields high margins.

In comparison to Amazon, rival Flipkart reported a loss of Rs 2,306 crore on a revenue of Rs 1,952 crore for the year that ended March 2016. However, these figures cannot be directly correlated to those of Amazon's as the Indian firm has set up a complex holding structure to navigate the country's complex FDI norms.

 

Fast, accurate and updated real time local news is available on your smartphone and tablet.
STAY CONNECTED EVERYWHERE YOU GO!

Author

Agencies