Amazon India’s Growth Has Come at a High Cost, Profitability Remains Elusive

NEW DELHI, (IANS) – Nearly a decade later, Amazon India’s report card is decidedly mixed, foreign brokerage Bernstein said in a report.

India is often the dream market of many global internet companies, yet also one of the most challenging to unlock — just ask the Chinese apps.

“Who can forget Jeff Bezos’ 2014 visit standing on top of a colorful lorry announcing a $2 billion investment? But nearly a decade later, Amazon India’s report card is decidedly mixed,” the report said.

The country is one of Amazon’s biggest overseas markets and one of its fastest growing with a best-in-class customer experience and large Prime customer base.

Yet this growth has come at a high cost of over $6.5 billion-plus invested to-date while profitability remains elusive the report said.

The company also faces immense competitive pressure in fast-growing categories, a weaker value proposition in ‘New’ commerce, limited traction in tier 2/3 cities, and an unfavorable regulatory environment for outsiders, it added. India is one of few large and under-penetrated e-Commerce markets with retail penetration of only 5 percent, well below the global average (14 per cent).

While India is a three-player market – Amazon, Walmart/Flipkart, and Reliance’s JioMart – the market remains quite fragmented with meaningful market differences by market tier, product category, and distribution models. Amazon leads on core categories (consumer electronics, media) and has done quite well in tier 1 cities with 5 million prime subs, the report said.

Reliance leads in eGrocery/O2O categories with 15,000 store retail footprint and a stronger 1P model. Flipkart has maintained leadership in the apparel category with 2x size of the nearest competition.

But newer players like the Softbank-funded Meesho ($5 billion GMV) are winning the faster growing tier 2/3 cities where Amazon has struggled to gain traction given low pricing and ‘zero commissions.