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Amazon earmarks $5bn for India

News, 22 July 2015

BANGALORE: Amazon, the world's largest online retailer, is reported to be planning to invest $5bn in India to turn the country into its biggest market outside the US.

According to the Economic Times, two unnamed people "directly familiar with the company's decision" also revealed that the ecommerce giant is planning to launch its instant video service and subscription-based Amazon Prime later this year.

Amazon entered India in 2013 and last year CEO Jeff Bezos announced investment of $2bn because of the "huge potential" he saw for ecommerce growth in India.

With an additional $5bn at its disposal, Amazon will be ramping up its challenge to domestic rivals, such as Flipkart, Paytm and Snapdeal, which have raised $5bn investment between them.

An executive at one of these companies described the challenge starkly. "Unlike us, Amazon doesn't have to get worked up on upcoming valuations, or getting a fresh investor in every round," the executive said. "They can keep funding to ensure the others in the market bleed."

Most of Amazon's additional funds will be spent on expanding its network of warehouses and data centres, the sources said, but it also aims to strengthen its online marketplace to compete more effectively with its Indian competitors.

Kartik Hosanagar, Professor of Operations and Information Management at the Wharton School of the University of Pennsylvania, said he expected Amazon's operations in India to fit well with what it does in the US.

"Overall, the bet on India will pay off well for Amazon – it's a high-volume, low-margin business in the US; Amazon India will be similar," he said.

"I don't expect high profits from India but definitely good scale. So, while we shouldn't expect Alibaba-like financials from India, Amazon will find that India nicely complements its efforts in the US," he added.

Data sourced from Economic Times, International Business Times; additional content by Warc staff