Amazon India reports Rs 1,724-cr loss on heavy ad spend

The Indian arm of the world's large online retailer had reported a loss of Rs 321 cr on sales of Rs 169 cr during FY14

Amazon India, the Indian arm of the world's largest online retailer, Amazon.com, reported sales of Rs 1,022 crore for the year ended March 31, 2015, a six-fold increase compared to the previous year. However, losses for FY15 stood at Rs 1,724 crore as the company burned cash on advertising and deep discounting to catch rivals Flipkart and Snapdeal.

Amazon India had reported a loss of Rs 321 crore on sales of Rs 169 crore during FY14, as revealed in a filing with the Registrar of Companies (RoC) on Saturday. An Amazon spokesperson declined to comment on the development.

Mint and The Economic Times first reported this on Monday.

Bulk of Amazon India’s losses were accounted for by advertising and sales promotion (discounts offered on products), clocking in at Rs 744 crore and Rs 662 crore, respectively. The company, despite starting its India operations only in June 2013, is already posting bigger losses than homegrown rival Snapdeal. While it’s hard to ascertain the exact revenue and loss figures of any of the large e-tailers in the country as they’ve set up complex holding structures, Flipkart’s losses during FY15 were to the tune of Rs 2,000 crore, while Snapdeal reported losses of nearly Rs 1,330 crore. Amazon, which is scrounging for market share in the country, has the lowest sales among the three players.

Flipkart, Snapdeal and Amazon are estimated to control 80 per cent of India’s e-commerce market, was valued at $12 billion in 2015.

The battle to dominate the market, which is pegged to touch $100 billion by 2020, has forced the three companies to heavily undercut costs of products to attract more customers. Investors have pumped billions of dollars into these companies to keep them ahead of rivals.

In December 2015, Amazon.com infused Rs 1,696 crore into its India unit as part of its planned $2 billion (Rs 13,500 crore) investment. The investment, which was reported on Saturday, makes Amazon’s total investment in India Rs 5,699 crore since July 2014.

The trend of heavy spending by Indian e-commerce firms on advertising and deep discounting has, however, drawn the ire of many investors. Nikesh Arora, vice-chairman of investment firm SoftBank, which backs Snapdeal, said in a public interaction at the Startup India event on January 16 that there could be a shift in strategy this year, where e-commerce firms compete for market share on value rather than by offering bigger discounts.