Amazon heavily dependent on Diwali sale for revenue

The company won’t go down the road of ad-supported Amazon Prime Video soon.


MUMBAI: Not only do Indians eagerly await Diwali but so does Amazon it seems. The largest online retailer across the world has published a mixed result for the third quarter. While its revenue fell short of Wall Street expectation, it posted a record profit. On the other hand, despite the growth in domestic business, the international business showed a significant slowdown. Interestingly, a late Diwali in India has been cited as the reason which shows how crucial the Indian market has become for it.

“There's also material change in the Diwali calendar in India. About half of our Diwali sales last year were in Q3. This year they'll be fully in Q4. So those are a couple factors that hit the international growth area in particular,” Amazon chief financial officer Brian T Olsavsky said in an earnings call.

In India, Amazon is already fighting the domestic player Flipkart which is now backed by Walmart. The first leg of Diwali sale from both the player was around same time. Despite Flipkart’s popularity in India, three fold number of people signed up on Amazon to shop in the first two days compared to last year.

“We've seen great response from customers. We've had 60 per cent growth in new customers during the period. Orders are coming in from 99 per cent of the pin codes in the country. So, great first wave of the, what we call the Amazon's Great Indian Festival, which lead into Diwali,” Olsavsky added.

Advertising has been one of the major areas where the company reaped high profit. The revenue from the unit representing its display, sponsored product and other advertising revenue jumped 123 per cent, more than double the growth rate a year earlier.  While it is locked in a battle with Google, Facebook for digital ad pie, the company has made it clear that it won’t go down the road of ad-supported Amazon Prime Video soon.

Amazon Prime membership, the card at hand to turn more consumers into shoppers, has continued to grow in US, as well as other countries. The company claims to be satisfied with the renewal data and annual sign up data since the price increase earlier this year.

“Since then, program remains very strong, both in membership and engagement, and a lot of our video content, music and shipping definitely as well as other Prime Benefits. We just continue to see that ramp up, not only in the US, but in other countries. So we do continue to make the Prime offer better as well,” Amazon CFO said.

Although the slowdown in international business led to fall in shares, it continued to reduce losses, which came down to $385 million in Q3 from $494 million in Q2. However, on the back of Diwali sale Amazon expects a huge boost to international segment reaffirming India’s importance in its business.

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