In a bid to acquire more customers in the country's fast-growing online retail market, e-commerce behemoths Amazon Inc and Flipkart India will reportedly invest nearly Rs2,300 crore in the near term, reports the Economic Times.
"We will invest in technology, creating infrastructure and logistics services, and specifically on the mobile platform to enable our sellers to deliver to customers across the country a wide selection of products very quickly and reliably," a spokeswoman at Amazon India told the Economic Times.
Amazon India said in a Registrar of Companies (RoC) filing last week that it was raising Rs 610 crore through a rights issue to its parent. In July, Amazon had announced a $2-billion investment in the country without giving a time frame.
At a board meeting last week , Flipkart approved plans to raise Rs1,300 crore through a rights issue to its Singapore-based parent and borrow up to Rs400 crore from Kotak Mahindra Bank. Two weeks ago, Flipkart's parent company raised $700 million in fresh funding from existing as well as new investors, pegging its valuation at $11 billion.
Both the companies have been burning through cash to attract customers by offering goods at cheap prices. This strategy has led to the retail sector vociferously accusing the online marketplaces of predatory pricing. These issues have resulted in both making losses and requiring fresh funding.
Amazon India, which entered India a year ago, had a net loss of Rs321 crore while Flipkart's losses doubled toRs400 crore in the year ended March. In 2014, the second year of operations, Amazon launched 24 new stores, increasing its selection to more than 19 million products, and expanded its seller base to more than 16,000 vendors. Flipkart, in comparison, says it sells 15 million products and gets 80 lakh visitors daily.
Online sales are booming in India. In the year ended March, Flipkart generated revenue of Rs2,846 crore, more than doubling the year-ago figure and overtaking both its largest offline rivals --Shoppers Stop and Kishore Biyani- owned Future Lifestyle Fashion. Analysts expect ecommerce to continue its surge, eroding sales of brick and mortar stores even further.
A recent JP Morgan report said, "We see ecommerce channel taking share from traditional brick and-mortar players and posing a significant risk to growth of organised retailers and malls, especially in the electronics and apparel category."
According to research and consultancy firm RNCOS, the Indian online retail market is estimated to more than quadruple to $14.5 billion from $3.5 billion.
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