Amazon loses Rs 3,572 cr in battle for e-commerce crown

Bengaluru: Amazon Seller Services' revenues jump by 123% to Rs 2,275 cr for the year ended March 2016, even as cumulative losses mushroomed to Rs 5,637 cr.

The main India unit of US-based online retail giant Amazon saw its losses more than double to `3,572 crore in the financial year ended March 2016, as it started ramping up spending to go past market leader Flipkart and invest in its infrastructure.

The increase in losses from `1,723 crore in the previous financial year indicates that Amazon Seller Services, which earns revenues from commissions and other services to sellers, lost $44 million or about `300 crore per month during the last financial year.

Amazon Seller Services also saw its revenues jump 123% to `2,275 crore for the year as well, even as to tal losses for the unit since it was set up mushroomed to `5,637 crore at the end of FY16.

The aggressive spending of Amazon has started showing some results. Compared to Amazon, Flipkart Internet's sales increased 153% to `1,952 crore during the same period. Both units earn revenues through commissions, advertisements and shipping fees that they charge sellers. But these numbers don't include revenues of Flikart's fashion subsidiary Myntra.

The pace of spending by Amazon India has only increased in the current financial year, as it introduced its global subscription service Prime and has also made an aggressive push into the grocery space.

Amazon recently invested `2,010 crore in Amazon Seller Services, as its monthly losses increased to about `1,000 crore in October in its battle for market leadership against Flipkart during Diwali. Amazon India has been losing about `600 crore during every non-sale month as well, ET reported last week citing sources.

This pace of spending is not expected to stop.“Amazon is in a full fledged customer acquisition mode right now and they will continue their pace in 2017. While till now market share shift to Amazon has been from other players like Snapdeal, in 2017 it could be from Flipkart,“ said Satish Mena, forecast analyst at Forrester Research.

The major expense item for Amazon Seller Services was its advertising and promotional expense, which went up 54% to `2,163 crore during the year. Legal expenses were the other major item, with lawyer's bill increasing 136% to `522 crore. Salaries and wage expenses also almost doubled to `348 crore during the year.

“We became leaders in all the things that matter to customers, we started seeing a meaningful impact of our investments in technology, innovation and infrastructure in the economic flywheel of India and we demonstrated recently in the Diwali season that how ecommerce in India should be done at scale,“ Amazon India country head Amit Agarwal had told ET last week.