The Indian government’s mandate that ecommerce companies only fulfil orders of essential goods such as groceries during the past five weeks has led to Amazon cutting back on a lot of its offerings in the country, company executives told analysts on Thursday.
“We’re in a bit of a holding pattern except for grocery in India,” said Brian Olsavsky, chief financial officer at Amazon, in a call with analysts after the company’s announcement of its earnings in the first quarter of 2020. “We’re now only fulfilling (orders) for essential goods…so that’s a cutback on a lot of our offering.”
Pantry Services Expanded
Meanwhile, on Friday, ministry of home affairs revised its guidelines and said ecommerce firms would be allowed to resume full operations in parts of the country designated as green (virus-free) and orange ( with low levels of infection) zones starting from May 4. However, deliveries will continue to be limited only to essential items in red zones with high levels of infection, including the top metros — Mumbai, Delhi and Bengaluru.
After getting off to a rocky start in delivering food and groceries in India — in large parts due to labour shortages and supply issues — Amazon has now expanded its Pantry service to 128 cities delivering pulses, packaged food and cleaning products. Normal deliveries of other essential items are up and running in 68 cities, the company said on its website.
Despite the surge in volume and value of grocery deliveries over the past month, analysts and industry executives estimate that Amazon’s India business is operating at less than 10% of its gross merchandise value prior to the lockdown, which began on March 25.
The Seattle-based company’s international sales, which accounts for all its businesses outside the US including India, posted an 18% growth to $19.1 billion in the first quarter, while losses more than quadrupled to $398 million compared to the year earlier period.
Company executives said Amazon has grown its overall sales amid the pandemic, with revenues rising 26% to $75.5 billion. However, profits fell to $2.5 billion, down from $3.6 billion in the same quarter last year due to increased spending on its Covid-19 response. Meanwhile, experts are of the view that as India’s curbs on full-fledged ecommerce began only at the very end of the first quarter, the total impact is yet unknown.
