Amazon's International Losses Fall for the Third Consecutive Quarter

Amazon, the world’s largest e-commerce giant, continues to improve its international performance. The Seattle based online retailer has reported narrowing losses in its international investments. In spite of the losses incurred in India, the growing operating margins in places such as Europe and Japan has made up for the loss. The overall international losses have reduced for the third consecutive quarter, after coming close to $1 billion. For the three months ending on June 2018, Amazon reported a loss of $ 494 million on sales of $ 14.6 billion in international markets, i.e. outside North America.

In the quarter ending March 2018, Amazon had announced a profit of $ 1.6 billion, double of its profit from a year ago. However, Amazon was intent on focusing in India. Amazon was determined not to be frightened by the mounting losses it incurred in India. Brian Olsavsky, the company's Chief Financial Officer, asserted, “We'll continue to invest in India where we're seeing great progress with both sellers and also customers. And we like the momentum we've seen there. We're adding local content in India, video content. We're also adding other benefits, Prime benefits. We're rolling out devices there, and we're seeing Indian developers developing skills for Alexa." Amazon has kept its promise and continues to invest in India at a frenetic pace. It has pledged to invest around $ 5 billion in India.

This week, Olsavsky has announced in a post-earnings conference, that Amazon Offers attributes its narrowing losses to “operating efficiencies” and successful advertisement business. There has been a fall in international losses for the first time since the second quarter of 2016 on a quarter-on-quarter basis. Also, there has been a strong wave of growth in sales as the company set its foot in new markets, and launched new products in India and other countries. Amazon’s international losses for the quarter stood at $494 million in June 2018. This amounts to a fall of 31% from $724 million in the corresponding quarter of last year. In the June quarter in 2017, Amazon had witnessed an escalation in international losses, which had grown by as much as 436%. Amazon was able to reduce losses starting with the first quarter this year, after the company's international loss hit a record high of $3 billion in 2017. 2017 had seen a more than double increase in losses from $1.28 billion in 2016. But in 2018, international sales has registered a growth of 27%, climbing to $14.6 billion from $11.4 billion in the second quarter.

Olsavsky declared in the earnings call that the operating margins have witnessed a steady improvement internationally. Europe and Japan are showing steady progress and efficient functioning in the field of fixed headcount, operations costs, infrastructure costs and marketing working. With the improved operating margins internationally, the cost efficiencies in Europe and Japan for the controlled losses and the international impact of advertising, Amazon has been able to make up for its losses.

He restated Amazon’s determination to continue investing in India. In May 2018, it infused fresh capital worth $ 26 billion in its India unit, Amazon Seller Services, thereby reinforcing its war chest against its domestic rival, Flipkart. Local rival Flipkart, having been acquired by international giant Walmart in May, has engaged Amazon in an embittered and costly market share battle. The competition has toughened since Walmart invested $ 16 billion in Flipkart in exchange for 77 per cent stake. Amazon believes that it can soon catch up and even overtake Flipkart over the next few years, even though in terms of gross monthly sales, Flipkart continues to be the market leader in the online retail business in India. In the last six months, Amazon has insisted that it is already a larger entity than Flipkart.

As Amazon celebrates its five year anniversary in India, its total investment in the Indian unit sums up to around $ 3.3 billion. It also continues to provide capital for its other units such as payments, cloud and technology services division. Amazon takes pride in being the most visited website in India. They are hopeful that they will make use of the available space for further innovations to cater to the needs of Indian consumers and sellers. To celebrate its fifth anniversary in June, its founder, the world’s richest man, Jeff Bezos, offered cashbacks to Indian consumers.

Amazon spends much of its investments in subsidizing the price of the products available on its platform. This is their unique marketing strategy to pull more customers towards themselves. The company aims to take its payments business forward as well. Amazon is also splashing out on Amazon Prime. The company is adding local video content, under the Amazon Prime programme in India. These investments have been directed towards building warehouses, strengthening logistics and increasing product assortment. Amazon is also investing funds into its other entities in India, including Amazon Pay and wholesale business. With the aim of attracting more consumers to shop online on its platform, the company is also investing significant money in advertising and promotions,. Prime has turned out to be Amazon’s strongest ammunition against its rival Flipkart.

It is true that the e-tailer’s losses continue to mount on account of India, and India continues to bring down Amazon's profits. However, this did not act as obstacle in the way of the company posting a record profit of $2.5 billion in the second quarter. The company's share went up more than 3 per cent in after-hours trading on Thursday, even though its $52.89-billion revenue was somewhat below analysts' estimates.

If there was any disappointment regarding the company’s performance in the second quarter, it has been balanced out by the company's 1,286 per cent increase in profits on a year-on-year basis. It is this flourishing business that is allowing the company to increase its investments in a developing country like India.