India’s Lockdown Restrictions Hit Amazon’s International Earnings Hard

Amazon said it will expand to other areas once it is allowed to resume operations in India

In terms of overall performance, Amazon’s revenue grew 26% to $75.5 Bn in Q1

In India, Amazon has requested the government to allow non-essentials delivery as well

The restrictions of the strict lockdown in India due to Covid-19 have had a massive impact on ecommerce giant Amazon’s earnings. The company in its quarterly financial performance report said that India was the most impacted among all its international businesses after the lockdown was initiated on March 25, 2020.

The company said that the Indian government has mandated ecommerce companies to only fulfil orders of essential goods such as groceries and sanitary goods. Hence, it has had to cut back a lot on its offerings in the country. But the company said that it will expand once the government allows ecommerce companies to resume operations.

“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 Q1 earnings announcement.

In terms of overall performance, Amazon’s revenue grew 26% to $75.5 Bn in Q1, but the profit fell to $2.5 Bn, owing to increased spending on Amazon’s Covid-19 response. Further, its international sales grew 18% to $19.1 Bn while losses more than quadrupled to $398 Mn compared to last year.

However, it is to be noted that the exact impact of India’s lockdown on Amazon will be seen only in the second quarter, as the restrictions on ecommerce came into effect on March 22, towards the end of the first quarter. With the third phase of lockdown in place till May 17, ecommerce companies are still only allowed to deliver essentials.

Recently, Amazon India head Amit Agarwal took to Twitter urging the government to allow them to deliver non-essentials as well as the essential products that they are currently selling. Agarwal said that ecommerce offers the safest way to ensure social distancing, saving lives and livelihoods. In other markets such as the US, Amazon has been allowed to sell non-essentials as well, while the restrictions in India have also come with supply chain challenges that have made essential deliveries quite difficult for many players.

However, Amazon has said that it would spend $4 Bn in the second quarter on coronavirus-related expenses, which include getting orders out to customers and also keeping its employees safe.

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Written by Bhumika Khatri


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