September 2014, Amazon AMZN -1.63%
Founder Jeff Bezos flashed a $2 billion check as he stood on top of a truck in traditional clothing in Bangalore. A bold display of the American giant’s ambitions in India. Then, less than a decade later, billions of dollars more were invested, Indian regulators became increasingly skeptical of US big tech, and Amazon became a South Asian nation. You may be losing your patience with
Last week, Amazon announced it would close three operations in India. It is a food delivery, educational technology business, and a wholesale e-commerce website. Closing these smaller subsidiaries doesn’t seem like a big defeat at first glance. But the exit from wholesale e-commerce is important. This means, at least for now, that Amazon is conceding to his Walmart-backed Flipkart and Reliance in “kirana-tech.”
According to CB Insights, “Kirana” is the Hindi word for India’s vast number of small stores, which are still a large part of India’s $932 billion retail economy.
Amazon’s service, known as Amazon Distribution, was a platform dedicated to B2B e-commerce, such as Kirana and department stores. It offered an amazing variety of products including health, beauty, baby care, food, laundry and stationery. It also competed with Flipkart Wholesale and JioMart, which is owned by Reliance Industries.
Meanwhile, Kirana’s online B2B market is worth $5 billion in 2021 and could grow from $90 billion to $100 billion by 2030, according to Indian consulting firm Redseer. And with India restricting foreign investment in multi-brand retail, building a corner shop supply chain was one of his key ways to cement Amazon’s presence.
India may just be a collateral damage to Amazon’s general belt tightening. The company admitted earlier this month that it was laying off employees The supposedly high cash burn of Amazon distributions in crowded spaces also made it an easy target for downsizing. India’s overall profit margin before interest, tax, depreciation and amortization is still around negative 5-10% despite over $6.5 billion of investment over the years.
But the Indian government’s growing animosity towards Amazon and other American tech companies, as well as increasing competition from politically connected local champions, probably won’t help. prize.
Earlier this year, India’s antitrust watchdog raided top sellers on Amazon and Flipkart online marketplaces. New Delhi alleges that an e-commerce company unfairly promoted preferred sellers on its website. The foreclosure of an Amazon-invested Future Retail store by local rival Reliance earlier this year was yet another slap in the face despite ongoing lawsuits to stop it.
Amazon itself has been relatively tight-lipped about recent developments. We do not take such decisions lightly and remain focused on providing the best online shopping experience for our growing customer base.
But with a possible global recession looming and multinational tech companies shrinking, the knives are out. In India, a highly competitive market with increasingly onerous regulators, cuts could be more severe than expected.
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