How India fits into Amazon’s strategy
Amazon.com, Inc. (AMZN), the online retail global giant, has already made over $1 billion worth of sales in India. This growth is pleasantly surprising for a company that hasn’t reported a meaningful profit in 20 years.
Amazon’s business strategy is to grow in areas where it’s profitable, to double down on things that are working, and to reinvest that money into new areas—and the company is sticking to that. Jeff Bezos, the founder and chief executive officer of Amazon, says India is the company’s fast growing territory. So, according to Bezos, India deserves big investment because it’s working so well.
What Jeff Bezos has to say about India
“Our success comes from getting the small and medium enterprises (SMEs) onto the online platform,” says Bezos. One of the things that Bezos finds unique about India is that there are so many small and medium enterprises. So, Amazon is leveraging that fact and inventing some new ways to get those SMEs up and online. So far, the strategy seems to working quite well.
Amazon’s entry into India
Amazon is the third largest player in India in terms of e-commerce transactions. The top two are Flipkart Internet Pvt. Ltd. and eBay Inc. (EBAY)-backed Snapdeal.com, which is owned by Jasper Infotech Pvt. Ltd. Amazon’s biggest challenger in India, Flipkart, said its online sales climbed to $1 billion in the year ended March 2014. The company raised $1 billion from investors the day before Amazon announced its $2 billion investment on July 30, 2014.
In July of this year, Amazon announced plans to spend $2 billion expanding in India. Market analysts believe the e-commerce market in India will grow to more than $30 billion over the next six years. That would still be just a small portion of the size of China’s e-commerce market, which had around $300 billion in online sales last year.
What it means forAmazon’s investors
Amazon has been quite successful in creating shareholder value since going public in 1997. Its stock price rose from $1.50 to $300 a share in those 17 years. Bezos believes the company has achieved this by being consistent, by thinking about the future, trying to put the customer first, trying to invent, and being patient. Its investment in India should benefit ETFs (exchange-traded funds) such as the WisdomTree India Earnings Fund (EPI), the PowerShares India Portfolio (PIN), and the iShares MSCI India ETF (INDA).