The ecommerce industry’s response to new government rules is boiling down to a tug of war between Amazon versus the rest. That’s the way it seems going by a draft letter circulated by the Internet and Mobile Association of India (IAMAI) lobby group among its members at the behest of Amazon India.
The draft seeks time until September to comply with requirements for ‘marketplaces’, the business model followed by the country’s biggest ecommerce companies Amazon India, Flipkart and Snapdeal. The key seems to be the stipulation that one vendor can’t account for more than a fourth of sales on a platform. Cloudtail, part-owned by Amazon, is a big seller on the marketplace.
“On behalf of the industry, we would like to state that the ecommerce companies already operating under this model would require some time to examine the provisions in greater detail and assess the impact, if any, on their business,” says the draft letter, which ET has seen. “This might include making necessary adjustments and changes in existing operational practices to comply in letter and spirit with the conditionalities explicitly detailed in the press note.”
Amazon India did not respond to an email asking if it needed time to be in line with the new rules and if there were differences on this between the company and its two main rivals. To all queries in general, Amazon India has always said it’s in compliance with laws of the land. Flipkart said it conformed to the rules. “We have always been compliant of all rules and regulations and will continue to adhere to the new guidelines as well,” a spokesperson said in an email. Snapdeal declined to comment.
No agreement has been reached on sending the letter because Amazon’s rivals aren’t too keen on backing the plea, said several people aware of the matter. They believe they are already compliant and such a request would be “bad optics,” said one of them.
IAMAI is a lobby group with members ranging from tech companies to ecommerce companies, including the three cited above. The draft letter, addressed to the Department of Industrial Promotion and Policy (DIPP), began circulating among about a year ago. But the country’s largest online marketplace says it has been steadily reducing this dependence. Similarly, Vector E-commerce was one of the biggest sellers on Flipkart’s fashion ecommerce unit Myntra until recently.
The government clarification became necessary as brick-and-mortar retailers complained that ecommerce companies were getting around the ban on overseas investment in business-to-consumer (B2C) multi-brand retail by describing themselves as marketplaces. The government said the new rules would ensure a level playing field and put an end to predatory pricing. Offline retailers have welcomed the new rules. Apart from ecommerce companies, IAMAI members include Facebook, Reliance Jio, Google, IBM and others.
Snapdeal cofounder Kunal Bahl had welcomed the new rules as soon as they were issued, saying the company already conformed to them. Its position is, clarity should be sought on specific issues and seeking blanket six-month delay won’t be helpful, said some of those cited above. People familiar with Amazon India’s operations said Cloudtail accounts for well over 25% of sales on the platform. Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran through holding company Prione Business Services.
It isn’t clear if other ecommerce companies would have a problem complying with the rule. WS Retail, originally owned by Flipkart’s founders before being spun off, accounted for about 80% of sales until members on March 30. Press Note 3 issued by DIPP on March 29 allowed 100% foreign direct investment in marketplaces, clearing up ambiguity about the businesses that Amazon, Flipkart and Snapdeal operated in India.
But while defining a marketplace for the first time, it barred such platforms from offering discounts on their own or influencing sellers in any manner besides limiting sales by a vendor or a group company to 25%. “In the wake of such eventualities, we request the department to kindly extend date of implementation of notification from the current March date of 29 to September 30,” said the draft letter addressed to DIPP joint secretary Atul Chaturvedi, who signed the Press Note.
Press Note 3 issued by DIPP on March 29 allowed 100% foreign direct investment in marketplaces, clearing up ambiguity about the businesses that Amazon, Flipkart and Snapdeal operated in India.
But while defining a marketplace for the first time, it barred such platforms from offering discounts on their own or influencing sellers in any manner besides limiting sales by a vendor or a group company to 25%. “In the wake of such eventualities, we request the department to kindly extend date of implementation of notification from the current March date of 29 to September 30,” said the draft letter addressed to DIPP joint secretary Atul Chaturvedi, who signed the Press Note. IAMAI president Subho Ray declined to comment.
Snapdeal cofounder Kunal Bahl had welcomed the new rules as soon as they were issued, saying the company already conformed to them. Its position is, clarity should be sought on specific issues and seeking blanket six-month delay won’t be helpful, said some of those cited above. People familiar with Amazon India’s operations said Cloudtail accounts for well over 25% of sales on the platform. Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran through holding company Prione Business Services.
It isn’t clear if other ecommerce companies would have a problem complying with the rule. WS Retail, originally owned by Flipkart’s founders before being spun off, accounted for about 80% of sales until about a year ago. But the country’s largest online marketplace says it has been steadily reducing this dependence. Similarly, Vector E-commerce was one of the biggest sellers on Flipkart’s fashion ecommerce unit Myntra until recently.
The government clarification became necessary as brick-and-mortar retailers complained that ecommerce companies were getting around the ban on overseas investment in business-to-consumer (B2C) multi-brand retail by describing themselves as marketplaces. The government said the new rules would ensure a level playing field and put an end to predatory pricing. Offline retailers have welcomed the new rules. Apart from ecommerce companies, IAMAI members include Facebook, Reliance Jio, Google, IBM and others.
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