India business most affected due to coronavirus lockdown: Amazon CFO

At a time when the coronavirus (Covid-19) has brought disruption for thousands of companies, Amazon on Friday said that the biggest impact internationally for the world's largest online retailer has been in India. The country is going through the world's biggest pandemic lockdown. While pointing out that the e-commerce firm is fulfilling only essential goods such as groceries, which has cut back a lot of its offerings, Brian T Olsavsky, senior vice president and chief financial officer of Amazon, said during an earnings call that the company would further expand in the country when the Indian government announces that it would be allowed to resume operations fully.  

“I think the biggest impact internationally has been in India where, of course, similar to all companies in India, we're now only fulfilling our essential goods such as grocery,” said Olsavsky. “So that's cut back a lot on our offering and we will further expand when the Indian government announces that we're allowed to resume operations. So we're in a bit of a holding pattern except for grocery in India.”

Like in the US, Amazon is pitted against Walmart, which acquired Flipkart in 2018 in a $16-billon deal, and also Mukesh Ambani-led Reliance’s e-commerce venture JioMart, to dominate the online retail market in India. Last month social media firm Facebook said it is investing $5.7 billion for a 9.99 per cent stake in Reliance Jio Platforms. About Rs 15,000 crore would remain with Jio, a huge amount which JioMart can use for building its e-commerce network, according to analysts.

According to industry insiders and analysts, the market opportunities for online commerce in the country is expected to touch $200 billion by 2028 from $30 billion in 2018.  However, the e-commerce companies are presently allowed only to sell essential goods like groceries, medical supplies, and baby food. 

Last month the government said e-commerce platforms would be allowed to sell only essential items during the lockdown extension, a move that the industry described as a complete U-turn from what was said earlier. The decision marked a big win for small trader bodies, most notably the Confederation of All India Traders (CAIT), which wanted the government to reconsider its earlier decision to allow e-commerce firms to sell non-essential items.

It was clarified by the Ministry of Home Affairs that the supply of non-essential goods by e-commerce companies will remain prohibited during the lockdown.

Amazon had issued a statement expressing its dismay. “The new guideline will disappoint not only the consumers……but the thousands of small businesses, sellers and manufacturers across the country, who had geared up in the past 48 hours to provide millions of people with safe access to products.”

The Seattle-based firm has been rolling out many initiatives to woo the sellers and deliver essential goods to the customers in India. Amazon India has strengthened tie-up with Railways for faster delivery of essentials. It is leveraging the ‘Covid-19 Parcel Special Trains’ introduced by the railways to ramp up operations to 55 lanes during the lockdown period. The company is rolling out a programme that will bring thousands of small shops in India onto its platform to deliver groceries and essentials. Small and Medium Businesses (SMB) across India have also been financially impacted due to the nationwide lockdown in these unprecedented times. In an effort to enable the SMBs in logistics that are heavily reliant on the company, Amazon India has introduced a Partner Support Fund.

Amazon announced financial results for its first quarter ended March 31, 2020. The net sales increased 26 per cent to $75.5 billion in the first quarter, compared with $59.7 billion in first-quarter 2019. The net income decreased to $2.5 billion in the first quarter, or $5.01 per diluted share, compared with net income of $3.6 billion, or $7.09 per diluted share, in first-quarter 2019.

“From online shopping to AWS to Prime Video and Fire TV, the current crisis is demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced,” said Jeff Bezos, Amazon founder and CEO. “The service we provide has never been more critical, and the people doing the frontline work — our employees and all the contractors throughout our supply chain — are counting on us to keep them safe as they do that work. We’re not going to let them down.”

Under normal circumstances, in this coming Q2, the company expected to make some $4 billion or more in operating profit. 

“But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe,” said Bezos.