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Amazon And India’s $200 Billion E-Commerce Market

Posted on Tuesday, Feb 7th 2012

According to a recently released Forrester report, U.S. Online Retail Forecast, 2010 to 2015, online retail sales in the U.S. grew 13% in 2010 to $176.2 billion. Online retail sales are expected to grow at a rate of 10% annually over 2010–2015 to reach $278.9 billion. Within the U.S., e-commerce accounts for 8% of total retail sales. Excluding grocery sales, e-commerce accounts for 11% of total retail sales in the country, and that number is expected to grow to 15% by the year 2015. Online retailer is obviously benefiting from this growth.

Amazon’s Financials
Amazon’s (NASDAQ:AMZN) Q4 revenues grew 35% over the year to $17.40 billion but missed the Street’s target of $18.25 billion. EPS of $0.38 fell 58% over the year but was significantly ahead of the market’s projected earnings of $0.17 per share.

Revenues from the Media segment grew 15% over the year, while sales from Electronics and General Merchandise grew an impressive 48%. Growth in the Electronics segment continued to be driven by Kindle sales. Last quarter, Amazon launched their tablet, Kindle Fire, to very positive reviews. Priced at $199, Fire was expected to be the only tablet gearing toward competing with Apple’s iPad. Given the iPad’s sales last quarter, while it is clear that Fire has not achieved that status, there is no denying the device has managed to make a mark for itself. During the nine-week period ending December 2011, Fire helped steer Kindle’s staggering growth of 177% over the year. Amazon did not divulge Kindle sales figures, but the market estimates that Amazon sold nearly 6 million Fire units and an additional 1 million Kindle e-readers during the quarter.

Amazon ended the previous year with sales increasing 41% over the year to $48.08 billion and EPS falling from previous year’s $2.53 to $1.37.

For the current quarter, Amazon projected revenues of $12 billion–$13.4 billion, compared with the Street’s projections of $13.4 billion. Their expected loss of $200 million–$100 million is also below market expectations as Amazon continues to invest in expanding fulfillment centers, digital businesses, and hiring for growth.

The Introduction of Junglee
As part of their international expansion, Amazon recently launched a website in India under the name does not offer the true experience as the site is primarily a marketplace to help buyers compare prices and then buy products from third-party retailers. Amazon has a listing of 12 million products spanning 14,000 brands on this site.

They are also working on building a fulfillment center in Mumbai. However, some products, like the Kindle, are sold directly by Amazon on the site and will continue to be subject to high international shipping and customs charges. Before launching, Amazon was catering to the Indian market through special free super savings offers on their U.K. website. According to analysts, India’s e-commerce market is projected to grow to $200 billion by 202o from an estimated $10 billion in 2011. Not surprisingly, Amazon is hoping to cash in on this growth.

Amazon’s Widening Reach
Amazon also recently expanded into a new sports collectible store. There are nearly 2 million items in this new category that includes trading cards priced at $4 each and even a $35,000 baseball autographed by Babe Ruth. Amazon is also planning on expanding into outdoor sports apparel.

As part of their efforts to expand into social-shopping products, last quarter they acquired startup Quorus. As part of the acquisition, Amazon plans to leverage Quorus’s talent, which has helped design the social shopping experience for multiple online retailers. Social shopping enables buyers to get advice and feedback from friends and family while evaluating a purchase. Quorus had enabled this feature for Amazon’s earlier acquisition, Zappos.

Amazon’s stock is trading at $183.14 with a market capitalization of $83.35 billion. It touched an all-time high of $246.71 in October 2011.

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