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Amazon pledges $2bn

New Delhi, July 30: Amazon today said it would invest $2 billion in India as the world’s largest e-tailer vies for the top spot in the country with local player Flipkart, which only yesterday announced an investment of $1 billion from a clutch of funders.

Jeff Bezos, founder and CEO of Amazon.com, said in a press statement: “India is on track to be our fastest country ever to record a billion dollars in gross sales. With this additional investment of $2 billion, our team can continue to think big.”

Both Amazon and Flipkart claim to be the largest online retailer in the country. Flipkart, in fact, was founded by two ex-Amazon staff Sachin Bansal and Binny Bansal, both alumni of IIT Delhi.

Amazon’s Indian arm, which was launched last year, has been making rapid inroads.

E-tailing accounts for $2.3 billion of India’s $400-billion retail market as of last year. A Crisil Research report released earlier this year said the market was growing at 50 per cent annually and could touch $8.3 billion by 2016.

At present, global e-commerce giants can act as platforms where buyers and sellers can meet and sell to each other, but can’t directly sell Indian inventories. Indian e-tailers can act as a shop and buy products from manufacturers to directly sell to customers. Amazon makes money by charging a fee from businesses that use its platform to sell.

The Obama administration has been pressing India to open up this trading window to US firms for quite some time and may seek some kind of commitment from India on this score during US secretary of state John Kerry’s visit to India.

Amazon India head Amit Aggarwal had told The Telegraph earlier that “worldwide Amazon follows a hybrid model” which sells both third-party products as well as its own inventories and would like to eventually do that in India too. This, say analysts, is true of most global retailers who have been watching the Indian e-commerce space keenly.

“After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations,” Bezos said.

Analysts see the US-based retailer investing in warehousing and logistics to cut its dependence on small businesses and courier firms to deliver Amazon platform goods to customers.

The American e-tailer has also partnered N.R. Narayana Murthy’s Catamaran Ventures, a private investment firm, to create Taurus Business and Trade Services, which will focus on encouraging small and medium businesses to go online. It has also started using local grocers in small towns to act as delivery and pick-up points for Amazon goods.

Flipkart, often called the Amazon of India, has an advantage as it does not have to depend on managing other firms’ products. It can simply buy their produce at deep discounts and then sell. In May this year, it acquired Indian online fashion retailer Myntra for Rs 200 crore to strengthen its market share. Indian rules as of now do not allow Amazon to sell in such a manner.

 
 
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