Amazon outstrips Flipkart by more than 75% mark in total investments

Seattle-headquartered e-commerce marketplace Amazon has outrun its rival Flipkart in terms of total investments in India, according to an ET report.

Since fiscal 2015, Amazon has invested Rs 14,940 crore into Amazon Seller Services, as compared to Flipkart’s Rs 8,349 crore investments through Flipkart Marketplace.

The investment gap becomes starker between Amazon and Flipkart in 2016-2017 as the former pumped in 2,010 crore into Amazon seller services and the latter invested a mere Rs 27 lakh into Flipkart Marketplace.

In FY 2015-2016, Flipkart Ltd, the Singapore based parent of India’s online retail giant, had invested Rs 1,629 crore into Flipkart Marketplace.

Flipkart Internet owns Flipkart.com and registers sales from advertisements and commissions charged on merchants. Flipkart Marketplace owns a 99.74% stake in Flipkart Internet.

The report added Flipkart’s cost cutting in fiscal year 2017 was based on its strategy on capital efficiency and becoming a leaner organisation while its $15.2-billion valuation saw multiple markdowns by mutual funds. It also slashed the number of employees to about 8,000 employees, as compared with about 15,000 at the beginning of 2016.

However, the Indian e-commerce major has shifted its strategy again since it raised over $4 billion from investors including China’s Tencent and Japan’s SoftBank Corp. Flipkart’s monthly cash burn rate, which had dropped to around $40 million at the end of 2016, has now increased to over $60 million, according to three investors and analysts.

But, when it is compared to Amazon, its cash burn rate is higher, which is invested into new customers acquisition even if it involves selling low-ticket value consumer products. “Amazon is losing at least 20% more than Flipkart per month,” said an industry source, talking to ET.

During this year’s festive season sales, cash burn for the e-tailing industry as a whole is estimated at $370-400 million as compared to $200-250 million during last year’s festive sales, according to a RedSeer analysis.

Flipkart has started investing in customer acquisition again, and profitability is not as high a priority as it was last year.

“Profitability was a very big metric for us last year. We have done a lot of it and we are now well-funded, and we don’t have to over-index on that,” Flipkart chief executive Kalyan Krishnamurthy said in an interview last month. “We can focus on getting new customers and improving customer experience.”

Now, talking about the entire e-commerce ecosystem, even Amazon’s investments into its marketplace in India plunged to Rs 2,010 crore in 2016-17 from Rs 7,463 crore in the year before.

“Equity inflows don’t follow the same cycle as business outputs and are instead linked to capacity and capability creation through capital investment in infrastructure, technology and content. We continue to invest as needed,” said an Amazon spokeswoman in an emailed response to ET.