The case for diversification is simple: spreading your bets reduces risks. When one product – or market – fades, another might pick up.
India Grows While the UK Hits Turbulence
That strategy is playing out for Amazon globally. Consider two markets, the UK and India. (FeedbackFive, incidentally, supports both.) Amazon entered the UK market with a bang in 1998. Within fifteen years, sales reached $7.3 billion. But growth has slowed. Last year’s 14 percent was less than half its pace in 2011.
Meanwhile, there is India. Amazon entered the Asian subcontinent two years ago and now offers 17 million products across 28 categories. “At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales,” said Amazon CEO Jeff Bezos in a recent statement.
Bezos made that prediction in a press release on July 30 announcing Amazon’s decision to invest $2 billion in India. That statement came a day after a rival online market in India, Flipkart, announced that it had raised $1 billion for business expansion.
Founded by former Amazon employees in 2007, Flipkart has 4,000 sellers and reached $1 billion in sales in March 2014. The company’s ambitious goals include quadrupling sales over the next year.
Amazon India boasts more than twice as many sellers as Flipkart, but far less than Snapdeal or eBay. (By law, Amazon India operates only through third-party sellers.) Amazon placed no time line on the $2 billion investment, which is about the same size as the total current Indian eCommerce market.
Prospects for growth, however, are strong. Internet penetration currently stands at just 19 percent. Investment bank Morgan Stanley expects that rate to grow 25 percent annually through 2018. The overall economy is also expanding.
Damage Control in UK
As Amazon helps prime the young Indian eCommerce market, in the UK the company has not only experienced slower growth (as it has elsewhere) but also been operating in damage-control mode.
Two years ago, The Guardian reported that Amazon was paying practically no tax. Since then, Amazon has faced backlash, including a boycott promoted by Margaret Hodge, a Member of Parliament and chair of select committee of the House of Commons that oversees government expenditures.
Amazon’s tax situation is not unique. Nearly half of Fortune 500 companies set up their subsidiaries in the Netherlands, more than a third run their European profits through offices in Luxembourg (as does Amazon) and almost as many have Ireland-based subsidiaries. What all these locations have in common, according to the International Business Times, is favorable tax climates.
All the same, Amazon’s reputation in the UK has taken a hit. How much of its slower growth is related to negative publicity is an open question. Businesses assume risks when they go international. Spreading those risks – and increasing opportunities – across multiple countries only makes sense.
Originally published on August 27, 2014, updated May 7, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.