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Amazon's India investment continues to bleed its international business

Amazon's India investment continues to bleed its international business
Reuters

E-commerce giant Amazon Inc.’s massive investment in India continues to drag its margins, with the loss of its international business growing by 30% to $622 million for the first quarter of the calendar year 2018. It had reported a loss of $481 million in the first quarter of 2017.

Brian Olsavsky, Amazon’s chief financial officer, said that the company will continue to invest in India, where it is engaged in a bleeding war with Softbank-backed market leader Flipkart, which is in the midst of discussions with Walmart for a buy-out.

“We will continue to invest in India where we are seeing great progress with both sellers and also customers. And we like the momentum we have seen there. The Prime programme started in the first year in India grew faster than any Prime programme we have seen in other countries," Olsavsky told investors during an earnings call.

In 2017, losses from Amazon’s international business widened to $3 billion from $1.3 billion the previous year.

In an interview with TechCircle in February this year, Amazon India head Amit Agarwal said that company was not looking at profitability and is focussed on growth.

The company has so far earmarked $5 billion for India and has deployed most of this amount. The company, which launched Amazon Music during the quarter in the country, has also been adding local content to its Prime Video and Music catalogue.

"We are adding local content in India. We are also adding other Prime benefits," Olsavsky said adding that the company has been rolling out Echo devices in India apart from local optimisation and integration for its Alexa software.

The Prime membership service offers free and faster delivery. Amazon has recently increased the annual membership fees to Rs 999 from the inaugural offer of Rs 499. In a letter to shareholders, founder Jeff Bezos disclosed for the first time that Amazon has more than 100 million Prime customers globally.

"We are seeing Indian developers developing skills for Alexa. It is important to us that they all are still delighting customers and growing to the best of their ability," Olsavsky added.

The losses of international business have been a great consternation for Amazon investors during the quarterly earnings call. While Amazon launched its Australia portal recently and is investing heavily in Japan and Europe, investors seem to be curious about the company's plans for India, the largest consumer market after the US and China.

Amazon's investments in India seem to be paying off with the company ahead of main rival Flipkart in app downloads, website visits and app usage metrics.

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