Amazon is investing $2b in its India operations, as the country’s online retail war heats up

E-commerce firm Flipkart raised $1 billion yesterday in what is by far the largest funding deal for an Indian startup to date. How can you top that? How about $2 billion?

That’s exactly what Amazon — one rival that has motivated Flipkart to raise more capital — is doing. The US company chose today to cheekily announce plans to invest $2 billion into its one-year old operations in India, as first spotted by Next Big What.

Amazon CEO and founder Jeff Bezos explained the “huge potential” that he sees in the country:

After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations. We see huge potential in the Indian economy and for the growth of e-commerce in India. With this additional investment of US $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India.

At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales. A big ‘thank you’ to our customers in India – we’ve never seen anything like this.

Amazon has, as ever, been selective with the figures that it makes public, although it claims to be India’s largest e-commerce site. The company claims 17 million products on its site, “a continually growing base” of thousands of sellers, and “millions” of customers across the country. For now it operates a marketplace model, like its local rivals, because India law forbids it from selling products direct to consumers.

Flipkart, on the other hand, claims “close to” 22 million registered users, 3.5 million visits to its site per day, and 5 million shipments per month. It says it is the first e-commerce firm outside of the US to reach $1 billion in GMV (sales on its marketplace).

India’s e-commerce market has huge potential for growth, as we wrote yesterday,:

The increase in capital is about giving the company a footprint to succeed in India’s e-commerce market that has vast potential as internet penetration and the rate of smartphone ownership increases. A report from Accel Partners earlier this year predicts that the number of online shoppers will double to 40 million by 2016, with their spending set to increase four-fold to $8.5 million.

Speaking to Quartz, Kunal Bahl, the CEO of Flipkart’s closest rival Snapdeal, predicted that the value of the online shopping market in India could reach $50 billion by 2020. That’s a whole lot of potential.

Now that two of its key players are stepping up their efforts, the wheels are certainly turning.

And let’s not also forget Snapdeal, which is backed by eBay (with a view to a future acquisition) and recently raised $100 million.

Headline image via David McNew / Getty Images