Amazon India says focused on bottomline, but mum on revealing when it expects to turn profitable

Published On: 12, Dec 2017 | Source: financialexpress.com

Amazon Seller Services, the marketplace arm of US-based e-tailer Amazon, says it has already started to focus on its bottom line. Gopal Pillai, director and general manager, seller services, Amazon India, told FE that given the company was a for-profit organisation worldwide, it was at all times watching both the top line and the bottom line. “As far as India is concerned, it is a strategic long-term investment and we would continue to make investments that enhance the customer and seller experience,” Pillai said. Without divulging a timeline by when the e-commerce firm hopes to turn profitable, Pillai said a specific target drives wrong behaviour. “We would continue to make progress in cost savings, revenue generations, etc, as long as we provide the right experience. With the best services and experiences, the right progress will come in due course of time,” he said.

The e-tailer claims that after taking close to three years to add 1 lakh sellers on the platform, it took just one year for it to add another 1 lakh sellers in January. Between January and September, the e-tailer claims to have added another 70,000 sellers, taking its total seller base to 2.7 lakh. “We have been adding 3,000 sellers a week post July 1,” said Pillai. According to Pillai, Amazon is now working towards what he calls creating a business based on economy of scale. “Growth comes in by providing best customer experience which in turn helps in driving traffic. The increase in traffic helps in getting more sellers with a large number of selections. When the business starts to register growth, that reduces the cost structure, further lowering losses. For example, if earlier we were selling 100 units of a product and had just two people at the warehouse shipping the items… Even if the volume rose by 10 times to 1,000, one is not required to double up the manpower, thus saving on cost,” he said.

Amazon Seller Services posted a turnover of of Rs 3,129 crore for the year ended March 2017, compared with revenues of Rs 2,217 crore in the previous year, according to regulatory filings with the registrar of companies (RoC) and data platform Tofler. It should be noted that the e-commerce company’s losses more than doubled to Rs 3,572 crore in FY16 from Rs1,724 crore in FY15 even as revenues increased to Rs 2,275 crore in FY16 against Rs1,022 crore in the previous year.

Moreover, Amazon reported losses of $936 million from its international business unit for the three months ended to September. The loss for the US-based e-tailer comes against the backdrop of the company’s heavy investments in India.

Amazon India claims its gross sales volume increased by 67% year-on-year in the September quarter versus the same quarter last year, as gross sales value increased by 72%. The e-tailer claims that in CY2016 it posted a 124% jump in gross sales volume, as value rose 108%.

Amazon Seller Services clocked gross merchandise value of $400 million in the first leg of the festive season sale from September 21-24, while rival Flipkart clocked $850 million during its five-day sale period in the same month, according to Jefferies.

RoC filings revealed that in November this year Amazon had invested another Rs 2,900 crore ($443 million) in its India unit as part of its commitment to invest $5 billion to expand its Indian business. With the fresh round of infusion, Amazon has pumped in about $1 billion into Amazon Seller Services in the current financial year itself. The development came on the back of Morgan Stanley’s statement that Amazon could become a $1-trillion company within one year.

While in June Amazon India received funding of Rs 1,680 crore, it got another round of funding of Rs 1,620 crore in September. In June 2014, Amazon CEO Jeff Bezos made an initial $2-billion investment commitment for its India business. In 2016, Amazon.com had said it would invest an additional $3 billion in India where it is locked in a battle against home-grown e-tailer Flipkart, which is backed by Japan’s SoftBank Group and Tiger Global.