Online retailing giant
) recently announced that it is planning to invest $2 billion
(INR12,000 crore) to expand its operations in India.
The news comes on the heels of the recent announcement by
Flipkart, India's largest e-tailer, to raise funds worth $1
billion, further heating up the competition.
Amazon stated that India is a fast growing e-Commerce market
which offers ample expansion opportunities. The additional
investment will support its online retail business and enhance the
customer and seller experience in the country.
Amazon forayed into the Indian market in Feb 2012 with the
launch of Junglee.com, a site which allows customers to compare
prices online and read customer reviews but not purchase items
In Jun 2013, Amazon launched its online marketplace in India
where it sells books, films, TV shows, mobile phones and cameras
among other items through its website Amazon.in. Seeing the
overwhelming response in India, Amazon plans to further increase
its investments in India and gain from the country's
rapidly-growing online retail market.
According to the global management consulting firm Boston
Consulting Group (BCG), India is the third largest country after
U.S. and China in terms of Internet users and is now on the verge
of a digital revolution. The firm expects Internet users in India
to increase threefold from 120 million in 2011 to 330 million by
According to BCG, India is, however, far behind other countries
like China and the United States in terms of online shopping.
Nevertheless, given the Internet-savvy population, BCG predicts
that there is room for further growth.
Naturally, established U.S.-based e-Commerce players like Amazon
will try to make India the future e-Commerce hub. Recently, the
company announced its plan to build five more fulfillment centers
in India, bringing the total number of large warehouses to seven.
These warehouses help online retailers to store products and handle
shipments and returns quickly.
With the expansion of Amazon, we can expect more fulfillment
warehouses to serve major Indian metropolitan areas.
As Amazon is way ahead of the other online retailers due to its
product selection, pricing, deals and platforms, the company could
give strong competition to local players, primarily Flipkart. The
company, in our view, is performing true to its form recording
revenue growth and generating significant cash flow quarter upon
quarter (discounting seasonal variations).
However, uncertainty regarding its investment plans and the
probability of incurring losses in the near term keep us on the
periphery regarding the shares.
Amazon currently has a Zacks Rank #5 (Strong Sell). Stocks that
have been performing well and are worth considering include
Ecommerce China Dangdang (
), Facebook (
) and Agilent Technologies (
), all carrying a Zacks Rank #2 (Buy).
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