India May Contribute 20% of Amazon’s Growth Over Next Five Years

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October 29, 2020 Topic: Amazon Region: Asia Blog Brand: Techland Tags: IndiaAmazonAmazon PrimeIndian EconomyEconomicsTechnology

India May Contribute 20% of Amazon’s Growth Over Next Five Years

The e-commerce giant seems poised for even greater heights.

India is far from being a major contributor to Amazon’s international growth today, but that might soon change.

“When you think about Amazon and their growth profile, (they) just had wicked growth in the last six months,” tech investor and analyst Gene Munster, who is the founder and managing partner at Loup Ventures, recently said on CNBC’s “Squawk Box Asia.”

“But you think about a normalized growth profile, you think about the impact of India, this could be 15 percent to 20 percent of its growth over the next five years—India could be.”

Amazon has already announced an array of investments worth at least $6 billion in India—including a $1 billion pledge in January to help small businesses in the country of 1.4 billion people.

The e-commerce giant is hoping that by the year 2025, it will export $10 billion worth of India-made goods around the globe.

Amazon, however, must find a way to maneuver through regulatory hurdles in the South Asian nation, which could include antitrust probes.

The company did, though, receive positive news last weekend when it won an injunction from a Singaporean arbitrator to temporarily stop a deal between the two major Indian retailers Future Retail and Reliance Industries.

In August, Future Retail announced that it would be selling its businesses in retail, wholesale, and logistics to Reliance for $3.4 billion, including debt. Amazon filed a legal suit against Future Retail, saying that the retailer breached contractual agreements that were part of a separate deal with the U.S. company.

Still, according to Reuters, the injunction from the arbitrator was not automatically enforceable in India and the order would have to be ratified by an Indian court.

Munster noted that whatever the outcome, Amazon’s share price wouldn’t likely react much because India contributes only a small percentage to the company’s overall sales.

“So, I think the convenient response from investors will be disappointment, but it’s only 3 percent of revenue,” Munster said.

“But I think it really misses the bigger point, which is to be successful in e-commerce in India, for a U.S. company to be successful, they must partner, especially given some of the local laws.”

In the last quarter, Amazon reported sales of $88.9 billion, up 40 percent from $63.4 billion a year prior and well ahead of the company’s own forecast of $75 billion to $81 billion.

The recently concluded Prime Day is expected to help the company report a record-setting fourth quarter—perhaps even surpassing $100 billion in quarterly revenue for the first time ever, according to analysts surveyed by FactSet.

Ethen Kim Lieser is a Minneapolis-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters