Amazon cited restrictions on ecommerce deliveries imposed by India in the ongoing lockdown to stem the spread of Covid-19, as the reason for its business in the world’s fifth largest economy being the most impacted by the pandemic, even as the American giant recorded a sharp spike in its overall revenue for the first quarter of 2020.
The Indian government’s mandate that e-commerce 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 cut back a lot on our offering.”
Meanwhile, on Friday, India’s Ministry of Home Affairs revised its guidelines and said e-commerce 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.
Read: Non-essentials sales curb could pinch ecomm firms hard
After getting off to a rocky start in delivering food and groceries in India–due in large part 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 22.
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 e-commerce began only at the very end of the first quarter, the total impact is yet unknown. Forrester Research has revised its estimate for growth in India’s e-commerce sector to just 6.8% for 2020 with a warning that it could be further lowered.
A recent survey by community platform LocalCircles showed that 78% respondents wanted the government to allow e-commerce to deliver all products from May 4, when the lockdown is slated to end. Half of those surveyed said they would choose to have products delivered to their homes, whether from e-commerce or local stores, even after the lockdown is lifted.
Global impact
Even as the world attempts to come to grips with the raging pandemic, Amazon has forecast that it would spend a massive $4 billion in the second quarter on coronavirus-related expenses.
“This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own Covid-19 testing capabilities,” Jeff Bezos, founder and CEO of Amazon, said in a statement on Thursday.
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