Amazon Plans $2 Billion Indian Investment to Challenge Flipkart

Jul 30, 2014 4:54 am ET

July 30 (Bloomberg) -- Amazon.com Inc., the world’s largest online retailer, announced plans to invest $2 billion in its Indian operations just hours after local rival Flipkart Online Services Pvt. secured $1 billion from investors.

The spending will support Amazon’s growth with India on pace to become the fastest market to reach $1 billion of gross sales, the company said in an e-mailed statement today.

Amazon and Flipkart are building their arsenals to gain a greater share of India’s e-commerce sales, which CLSA Asia Pacific Markets projects will grow sevenfold to $22 billion by 2018. India has one of the youngest online populations with access to the Internet surging as more consumers gain broadband connections and smartphone adoption grows faster than China, spurred by the availability of cheap devices.

“We see huge potential in the Indian economy and for the growth of e-commerce in India,” Amazon founder and Chief Executive Officer Jeff Bezos said in the statement. “With this additional investment of $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India.”

Flipkart yesterday raised $1 billion from investors including Tiger Global Management LLC, South Africa’s Naspers Ltd., Singapore sovereign wealth fund GIC Pte and Russian billionaire Yuri Milner’s DST Global.

The investment is the most raised in India’s e-commerce industry, according to data compiled by Bloomberg. The money would help Flipkart solidify its place as the largest e-commerce site in India and hold off Amazon and E-Bay-backed Snapdeal.com.

Flipkart Applications

In May, DST Global led a $210 million fundraising for Flipkart and the Indian company bought clothing site Myntra.com to strengthen its position against Amazon.

Flipkart plans to use the latest funds to acquire mobile application companies and invest in technology, Chief Executive Officer Sachin Bansal said in a conference call yesterday.

“Using big data for creating better experiences for the customers is a key space and we are going to focus on that,” Bansal said.

Flipkart says it has 22 million registered users and delivers 5 million shipments a month, according to a company statement.

Amazon entered the Indian market in June 2013, and now sells over 17 million products from smartphones to furniture according to a company statement. The company yesterday announced plans to build five new warehouses across the country to facilitate delivery.