SUMMARY
Amazon India Is Expected To Reach $70 Bn GMV By 2027
As the Indian ecommerce market becomes a battleground for global giants Walmart, Amazon and Alibaba, the market is intense and full of speculation. While these companies continue to focus on customer acquisition and retention, a Citi research report has suggested that Amazon India could be valued at $16 Bn right now.
Sixteen billion dollars! This figure has been in many headlines since Walmart acquired an over 77% stake for $16 Bn in Flipkart and caused much unease to Amazon. However, Amazon India, too, is worth the same amount now.
Citi Research released a report last week in which it said that Amazon India is expected to reach $70 Bn in gross merchandise volume (GMV) and $11 Bn in net sales by 2027.
Citi’s senior analyst Mark May and Hao Yan noted in the report, “We believe that the India ecommerce market will grow at a 21% CAGR over the next ten years to reach a mark of $202 Bn, that Amazon could capture 35% of this market and that the company could generate more than $10 Bn in revenue and nearly $1.5 Bn in FCF (free cash flow) by 2027.”
“After disappointing results in China, Amazon — led by its founder and CEO Jeff Bezos — has been determined to win in India,” the report said. “India is poised to be one of the largest and fastest ecommerce growth markets for the next decade,” it added.
The Citi report states that a unique feature of the Indian ecommerce landscape is that by law, ecommerce companies are only permitted to operate as marketplaces.
In the Indian ecommerce market, the report estimates that Amazon India is currently in second place at about $5 Bn in GMV.
The duo said in the report, “Amazon’s founder and CEO Jeff Bezos told us last year that he learned a key lesson in China that he does not plan to repeat in India — not being aggressive enough, and not investing enough.”
This comes true with Bezos’ $5 Bn commitment in India to build Amazon India’s infrastructure and growth. The report also noted that Amazon India already has 42 fulfilment centres, 150 delivery stations, and 25 sortation centres.
Amazon India: Continued Commitment
While Amazon tried to be the deal breaker for Flipkart-Walmart, the company has been expanding its presence in India since its entry in 2013.
Amazon had committed $5 Bn investment in India. Recently, Jeff Bezos claimed in a letter to shareholders that its paid subscription service, Prime, added more members in India in its first year than any other geography in the company’s history. Prime selection in India now includes more than 40 Mn local products from third-party sellers.
As the company continues its tryst in India, Amit Agarwal, Amazon India head, shared that Amazon expects groceries and household products to account for over half of its business in the country in the next five years, as it moves to broaden offerings in the segment and foray into areas such as fresh produce.
In January, Amazon infused $385.7 Mn (INR2,600 Cr) into Amazon Seller Services. So far, Amazon has infused over $3 Bn in Amazon Seller Services.
Recently, Amazon opened 15 fulfilment centres in Bengaluru, Delhi, Hyderabad and Mumbai to create a specialised network for Amazon Now.
While Amazon India’s food retail plans have hit a roadblock, the company continues to expand its portfolio and has onboarded Indian handloom weavers, and also introduced Shutterbug.
With India’s ecommerce industry expected to touch $200 Bn by 2026, according to a report by Morgan Stanley, the market reached $33 Bn registering a 19.1% growth in 2016-2017, revealed in the Indian government’s Economic Survey 2018.
As SoftBank looks to change its bets in the Indian ecommerce industry with Paytm Mall, and Alibaba already betting big on the company, the market is ready to be the battleground for Flipkart-Walmart, Jeff Bezos’ Amazon, and the Alibaba-backed Paytm Mall.
