Amazon Overcomes Slowdown In India To Post Revenue Growth In Q1

Seattle-headquartered global ecommerce giant Amazon announced financial results for its first quarter ended March 31, 2019. The company said that it saw international growth in the period despite facing some downtime in India.

Brian T. Olsavsky, senior vice president and chief financial officer, Amazon addressed the question during the earnings call and said that in the last quarter, the company was just heading into an uncertain period with the PN2 ruling.

“We did make some changes to our structure to stay in compliance with all regulations. There was a few days of downtime for some of our selection. But for the full quarter, the impact was minimal and we’re in compliance and we’re very happy with the progress of the business in India,” he said.

The downtime being referred is the change in foreign domestic investment rules for ecommerce in India, announced by the Indian government on December 26, 2018. The rules were set to come into effect from February 1, 2019 and had caused much havoc to biggest Indian ecommerce marketplaces— Amazon and Flipkart.

In the Q4 earnings call, Olsavsky had said that the new FDI guidelines would affect the company’s price, selection, and convenience for both customers and sellers in India.

Amazon’s Q1 2019 Performance

Amazon reported a 17% growth in net sales reaching $59.7 Bn in the first quarter, compared with $51 Bn in first quarter 2018. The company’s operating income increased to $4.4 Bn in theQ1 2019, compared with operating income of $1.9 Bn in Q1 2018.

Amazon’s net income increased to $3.6 Bn in the first quarter, or $7.09 per diluted share, compared with net income of $1.6 Bn, or $3.27 per diluted share, in first quarter 2018.

In the next quarter, Amazon expects net sales to be between $59.5 Bn and $63.5 Bn, or to grow between 13% and 20% compared with second quarter 2018.

The Trouble Of FDI For Amazon

Following the implementation of the FDI in ecommerce guidelines on February 1, ecommerce marketplaces were barred from selling products from companies where they own a stake.

The rule also directed that marketplaces will not mandate a seller to sell products exclusively on its platform. It also prohibited the companies from making more than 25% of purchases of a vendor.

Here are some of the steps taken by Amazon to follow the changed rules:

• Amazon India removed all the product listings from its preferred sellers such as Cloudtail and Appario Retail in India.
• Amazon’s hyperlocal service Prime Now also stopped offering grocery and electronic products on the company-fulfilled NOW store.
• Amazon India announced that it does not own any equity in the seller company nor does any seller buy more than 25% of its inventory from its wholesale business
• Amazon’s Global Store was losing its virtual presence in India after it witnessed a sharp fall in the items listed on the platform.
• Amazon reduced its commission charges to attract more independent sellers in February

In February, Amazon’s shares fell by 5.38% to $1,626.23, losing $45.22 Bn in market capitalisation. At present (April 26), Amazon is at its more than seven-month high at $1902.25.