$1 billion investment is not to provide deep discounting or cover losses: Amazon India

Ecommerce giant, Amazon India, is categorical that the $1 billion investment announced by Jeff Bezos during his recent trip to India would be used for long-term development of its operations and not for deep discounting or cover losses.

“A lot of our investment is focused on the long-term and if we only look at the short-term, we would not be doing the right thing for the country. We have been able to build over 50 world-class, multi-million dollar fulfillment centers. We have enabled 8 lakh artisans and weavers by partnering with 15 plus states and central government and 2.8 lakh women entrepreneurs by partnering with institutions like SEWA,” Gopal Pillai, VP - seller services, Amazon India told ET Digital. “We would not be able to do this if we are just focused on the short-term. We are putting a lot of investment today, so that it can be beneficial 5-10 years down the line.”

Bezos had announced an investment of $1 billion to digitise SMBs in the country, but Commerce and Industry minister Piyush Goyal created a flutter when he said Amazon is not doing any favour by planning to invest a further $1 billion in India.

Goyal added that it was surprising that a marketplace model like Amazon was incurring heavy losses, and wondered if it was because of deep discounts it provides. “They may have put in a billion dollars, but if they make a loss of a billion dollars every year, then jolly well they have to finance that billion dollars. So, it’s not as if they are doing a great favour to India when they invest a billion dollars," Goyal said. The minister later clarified that his statement was misconstrued and the government does not have a problem with investments within the current rules and regulations for the sector.

Pillai says prices are set by the sellers and Amazon does not play any role in that. “From the perspective of deep discounts, it is the sellers’ discretion on how much discount they want to give. Most sellers are the same that you see in the offline world and if the same seller wants to provide discounts through our marketplace, then it is their call. The billion dollar investment does not have anything to do with discounting. We are going to double-down on our successful programmes, launching and scaling digital haats and helping exports to get to $10 billion by 2025.”

Pillai says the company is buoyed by the success of the Global Selling programme, which crossed $1 billion in e-commerce export sales from India in just three years since its launch in the country. “That is how we assess the success of these programmes and the billion dollar investment announcement came exactly for this reason. Initially we planted the seeds and did not know what will happen, but 2-3 years later when the Global Selling programme has crossed $1 billion, we want to put more money because that enables manufactures in the country to not only reach Indian, but global customers. This billion dollar investment is going to help exporters reach the $ 10 billion target for us by 2025.”

Pillai says the key to its future plans are the Digital Haats, which are physical, brick and mortar resource centers to enable, empower and educate MSMEs about the digital economy. Digital Haats are a new investment that Amazon is making and it plans to have 100 such centers by 2025.


Hurt interest of small businesses?
Despite the investments made, ecommerce portals like Amazon and Flipkart have constantly faced a barrage of criticism of working against the interests of small businesses in the country.

The Confederation of All India Traders (CAIT) has been the most vocal opponents and in a recent letter to the Commerce Minister, its National Secretary General Praveen Khandelwal says, “Not only their business models, but their respective foreign investments and its disbursal, aspect of avoidance of GST & Income Tax revenue and probabilities of burning cash by them should also be investigated.”

CAIT has been long demanding the rollout of a robust e-commerce policy and setting up either a regulatory authority or an e-commerce ombudsman to ensure healthy and competitive business.

“I am confused, because the impact we have seen is incredible. About 20,000 Amazon Easy owners and 23,000 Amazon I Have Space owners are powered by local traders and MSMEs. Similarly, we have 5.5 lakh sellers on our marketplace, of which 3500 are crorepatis and 18,000 are millionaires,” says Pillai.

Pillai adds that at the recent Smbhav event, more than 3600 SMBs participated in the two day programme and a significant number was not associated with Amazon, but still wanted to know about the opportunities and how they can be a part of the system. “We were thrilled with the support they showed for the event and in my interactions with them, they were very happy with the set of prorammes Amazon has launched. They wanted to be associated with these programmes and take advantage of it,” says Pillai.

Industry watchdog Competition Commission of India (CCI) has also opened an investigation into alleged discounting practices of ecommerce portals, including Amazon and Flipkart. Allegations include unfair discounting practices, exclusive brand launches on the platforms and the preferential treatment to certain mobile phones sellers. Pillai, however, says the company has done no wrong.

“The good thing about working for a company like Amazon is that standards and compliances are our top priority. Amazon has been compliant from day 1 and on every aspect we are compliant today and will continue to be tomorrow,” says Pillai.