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Big part of challenge in India is helping sellers grow their online business: Tom Szkutak, Amazon


The biggest difference between the Indian and Chinese market is that in India the primary focus is on sellers and connections of sellers, Amazon’s CFO & senior VP Tom Szkutak said during the company’s Q1 2015 earnings conference call. He added that a major part of the India challenge was to ensure that Amazon can help sellers from across India succeed and grow their business online.

In March this year, Amazon had launched its seller app in India, which allows them to update their inventories, confirm orders, check current prices, sales rank and customer reviews of items on Amazon, estimate the profitability of items before they are listed for sale and list new items to sell. Additionally, the app sends push notifications to sellers when buyers send them a message, allowing direct communication via the app.

Szkutak also said that they’re very excited about India, and that Amazon will be investing heavily in India as it views the country as a major opportunity. As of Q4 2014, Amazon had claimed to offer over 19 million products on its India site from over 16,000 sellers. He also mentioned and that in local currency terms Amazon has almost broken even in the international segment operating income for the quarter.

On Prime: Answering an analyst question Szkutak said that Amazon had spent about $1.3 billion on content (original & licensed) for its Prime platform. Szkutak also mentioned that this money is still an investment for Amazon, and it’s still impacting their operating results, however there are several positives as well. He mentioned that they’ve witnessed that consumers that come to the Prime platform because of the content that Amazon offers, also end up spending on physical products like clothing, shoes, and electronics among others.

Szkutak also said that they don’t have specific metrics to share regarding Prime Now for this quarter, however, he mentioned that Prime Now is now operational in 7 cities across US. Szkutak also mentioned that category expansion, opening new Fulfillment Centres (FCs), original content, Prime Instant Video devices, and Prime Now among others are all interconnected with Prime and an important component of their consumer business in Prime. Amazon currently has 109 FCs around the world.

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In the previous quarter, Amazon had informed that memberships for Amazon’s subscription service Prime, which offers two-day shipping, allows users to stream movies, TV shows & music, and also store photos, has grown 53% year-on-year (YoY) in Q4 2014 globally, while in USA it has grown about 50% YoY.

Readers will remember that earlier this year a The Economic Times report had mentioned that Amazon is looking to bring its Prime service to India later this year, but hasn’t finalised a date yet. Amazon’s competitor in India, Flipkart had launched an annual subscription service similar to Prime called Flipkart First, in May last year.

On China: Amazon’s VP & CFO of Global Consumer Business Brian Olsavsky mentioned that Amazon is opening a global store on its site in China, which will provide Chinese consumers access to over 1 million Amazon products from around the world. Apparently, these products will be stocked and ready to ship from Amazon’s FCs in China. He also mentioned that Amazon is looking at China from a long-term perspective and will be focusing on the global store and its team of flagship stores.

Operational highlights

– In March, Amazon launched an express delivery platform called KiranaNow to make everyday consumer products available to its users in Bangalore. Amazon partnered with local kirana (grocery) stores to offer this service, which is in the pilot stage in Bangalore and is likely to be launched it in other cities in the future. Amazon had claimed that through this service delivery will take only 2-4 hours.

– In April, Amazon launched a business supplies e-commerce platform called AmazonBusiness in India for small and medium sized businesses (SMBs) to procure supplies. This is similar to the AmazonSupply platform the company operates in US. The service is currently in the pilot stage in Bangalore.

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– Amazon India tied-up with IRCTC in March to sell various products to IRCTC customers. However, the products are not sold on IRCTC’s website, instead users are redirected to Amazon’s site. What’s surprising is that there are no special offers or discounts on offer for customers coming from IRCTC.

Amazon financials

Amazon reported net sales of $22.72 billion during Q1 2015, up 15% from $19.74 billion in Q1 2014. In the previous quarter, Amazon had reported net sales of $29.33 billion, mostly buoyed by the festival/holiday season sales. Net income increased 74% to $255 million in this quarter, from $146 million in Q1 2014. Surprisingly, in Q4 2014, Amzon’s net income was $214 million.

Amazon reported a net loss of $57 million for the quarter, down 47.2% from $108 million loss reported in Q1 2014. Amazon’s media business revenues for Q1 2015 stood at $5.28 billion, marginally down by 3.29% from $5.46 billion in Q1 2014. The media business includes revenues from sale of books, music, movies, video games & consoles, software and digital downloads. And revenues from electronics & other merchandize business stood at $15.62 billion for the quarter, up 20% from $13.01 billion in Q1 2014.

Download: Press Release | Presentation | Conference Call

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