Is Amazon Banking On India For Growth?
Amazon (NASDAQ:AMZN) predicts that India will be its biggest market after the U.S. within a decade and that the India e-commerce market as a whole is an opportunity, which will be measured in trillions of dollars. [1]. In December 2015, Amazon led a $23 million investment in India-based Housejoy, a start-up that offers on-demand home services such as home cleaning, plumbing, beauty, fitness, laundry and other such services. [2] According to comScore, Amazon became the most visited e-commerce site in India in October 2015, two-and-a-half years after its launch in the region. [3]. We believe that given India’s demographic profile and low internet penetration, the potential for e-commerce growth is huge in the region and Amazon appears to be investing in this growth opportunity.
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E-Commerce In India Poised To Grow Ten Times By 2030
According to a Goldman Sachs report, the Indian e-commerce market will be around $228 billion by 2030, lower than today’s U.S. ecommerce market ($281 billion) but 10 times as large as India’s market today. [4] While this is a quarter of Amazon’s trillion dollar estimate, it still shows a huge potential for growth. Sales of Amazon’s international segment are nearly half of its net sales in North America, but this segment has the highest potential for growth. E-commerce sales are projected to be less than 2% of total retail sales in India by 2018, compared to 9% for the U.S., indicating potential for growth.
Although Amazon faces tough competition in India, primarily from local e-tailer Flipkart. Launched in 2007 (six years before Amazon) the company commands a 44% market share, three times that of Amazon’s 15%., [1] the company is ready to make huge investments in the country to increase its share in this growing market. Amazon is also focusing on the O2O (i.e., online-to-online) segment in India and the recent investment in Housejoy is an indication of this interest. India is witnessing a new era of O2O commerce and is touted to be a bigger opportunity than e-commerce in India.
Even with less than 20% internet penetration, India’s internet users in number surpassed those in the U.S. in December 2015, which is an indicator of the growth opportunity. [5] [6] While Amazon is investing heavily in e-commerce and related services in India, its goal currently appears to establish a significant presence in the region, even at the cost of sacrificing profitability. It has a long way to go in India and whether the current investments with a long-term profitability goal will be fruitful will depend on the evolution of both e-commerce and O2O commerce in India.
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- How Jeff Bezos aims to conquer the next “trillion dollar market”. The Inside Story, Fortune, January 1, 2016 [↩] [↩]
- Amazon leads $23M Investment In India-Based Home Services Startup Housejoy, Techcrunch, December 16, 2015 [↩]
- Customers Make Amazon.in Tops In India, Amazon Press Release, December 2015 [↩]
- The Epic Battle For India’s E-Commerce Market, The Wall Street Journal, October 2015 [↩]
- Internet Users per 100 people, The World Bank [↩]
- India on course to overtake US next month in Internet user base, Livemint, November 30, 2015 [↩]