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Time running out for Amazon India to conform to new FDI norms in ecommerce
Having failed to gather support for a letter lobbying the government to defer the implementation of rules on ecommerce by six months, Amazon India may have to take rapid action to make sure it conforms to them, said people with knowledge of the matter.
The government has said that no vendor on a marketplace the business model for ecommerce companies Amazon India, Flipkart and Snapdeal can account for more than a fourth of sales. But Cloudtail, part owned by Amazon and the dominant seller on the site, may exceed that limit, which means the parent will need to ensure this isn’t the case, especially as the new rules took effect on March 29, the day they were issued in a Press Note.
Also read: Amazon in lone battle to delay government’s ecommerce norm rollout
Amazon didn’t answer specific queries in this regard but reiterated that it is compliant with all the country’s laws.
“We have and we will continue to operate within the parameters of the laws and policies of India as we do in each country we operate in,” an Amazon India spokesperson said in an email. “We are very excited with the growth that we are witnessing in India and we are here for the long term.” As ET reported on April 4, Amazon had wanted the Internet and Mobile Association of India (IAMAI) to request the government to allow a six-month delay on the foreign direct investment (FDI) policy on marketplaces. But fellow members and rivals Flipkart and Snapdeal didn’t support the cause, which meant the joint letter never got sent, said two people aware of the development. ET had seen a draft version of the letter.
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“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,” the draft note had read.
“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.”
Couldtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran through holding company Prione Business Services. Amazon India may be running against time to bring its share of sales down to the stipulated threshold in the next three months before the company’s next expected regulatory filing to the US Security and Exchange Commission at the end of June, said one of the persons cited above.
In the last one year or so, Amazon has invested around Rs4,800 crore in the flagship Amazon Seller Services as it looks to capitalise on the boom in the country’s ecommerce, which is expected to surge to $60-70 billion by 2019 from about $17 billion in 2014, having missed out on the opportunity in China. In this regard, it should be noted that Chinese ecommerce giant Alibaba plans to enter the Indian market on its own this year, having already invested in Snapdeal and Paytm, a mobile wallet company that also has an ecommerce business.
In its email to ET, Amazon said it is “excited” about the success it has had since entering India three years ago with more than 3.5 crore products sold on its platform. “Today, over 80,000 sellers in India are able to offer millions of products across the country through Amazon.in. We are enthused by the opportunity to serve our customer and sellers on amazon. in,” the email said.
Last week, India defined the marketplace model. Apart from the 25% ceiling on a single vendor, foreign-funded marketplace operators are also barred from offering any discounts directly themselves and can’t influence prices on their platforms.
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