Amazon (NASDAQ: AMZN) plans to add an additional $3 billion investment to India, bringing its total investment to $5 billion. After it failed to shake the dominance of Alibaba (NYSE: BABA) in China, CEO Jeff Bezos has expressed his desire to never repeat the Chinese failure. He said, “We see huge potential in the India economy” in a statement.
India, one of the fastest emerging market, has attracted the fierce competition between Chinese companies and U.S. companies. Amazon currently has the third largest market share in India while Alibaba has invested Snapdeal and Paytm Mobile Solutions; nevertheless, India local e-commerce company Flipkart steadily occupied the first place at 45% market share in 2015.
According to World Bank’s data, the number of users who access the internet in India has drastically risen from 7.5 per 100 people in 2010, to 18 per 100 people in 2014. With 462 million users, India is the second largest internet user country, expected to double its user base in next 5 years. Analysts at Morgan Stanley believe that India’s internet market can grow to $137bn by 2020 (a CAGR of 43 percent) and e-commerce will become the largest part of the internet market at $102bn.
Last year, Amazon’s international segment sale increased 5.7% to $35.4B, compared to 25% in North America to $63.7B. Amazon has adopted a new strategy to grow India’s market share. Mr. Bezos said, “One of the top-level lessons is that we have done much more local market customization in India than we did in China”. Changes include launching a service whereby customers can use tablet devices installed in shops to make purchases.