While Walmart’s $16 billion buyout of Flipkart this year was the biggest in-bound acquisition in the country, Amazon has invested nearly $5 billion since entering the country five years ago. The move is also being in some quarters as a political ploy to pacify small sellers who earlier bore the brunt of policy decisions such as demonetisation and the Goods and Services Tax (GST).Ī lot is at stake given the billions that have been pumped into the Indian e-commerce sector. “Ultimately, the goal of the regulatory authorities is to provide consumers with the best possible goods at the best possible price and the new move does neither.” “The new ruling neither helps the e-commerce market nor is it customer friendly,” said Satish Meena, senior forecast analyst at Forrester. One argument is that e-commerce companies have invested significantly to form these joint venture seller-entities in order to adhere to the existing DIPP rules. “This is a convoluted change in an already convoluted policy… neither does it benefit the consumer nor is it practical to implement,” Singhal said. Some industry observers feel that the government’s decision is ill-conceived and difficult to execute.Īrvind Singhal, chairman and managing director at retail consultancy and research firm Technopak, likened the norms to the FDI policy for retail, which was conceptualised around 15 years ago for the first time but has always been steeped in confusion and ambiguity. “The new ruling deems a seller as an inventory-driven seller if more than 25% of purchases of such vendors are from the marketplace entity or its group companies.”įlipkart and Amazon both have wholesale arms which sell goods to vendors on their platforms on a B2B basis.Īccording to Atul Pandey, partner at legal firm Khaitan & Co, until and unless there emerges a clarity on how control on inventory is exercised, DIPP is likely to interpret it expansively.Īn Amazon spokesperson told TechCircle that the company was still evaluating the guidelines while Flipkart did not respond to queries till the time of publishing this report. “For example, the B2B wholesale procurement operations, which enabled the likes of Flipkart and Amazon to be involved in their own platforms, will be significantly compromised as a result of this new change,” said Vaibhav Kakkar, partner, general corporate & regulatory practices at law firm L&L Partners. Likewise, the move which places the burden of fulfilling warranty and post-sale problems such as defective products, refunds and return on the seller could significantly impact customer satisfaction.Įxperts say that Flipkart and Amazon had largely made these processes hassle-free by taking on those responsibilities. Going forward, there could be contracts and tie-ups but not ownership,” he added. “The guidelines clearly say that you cannot have an entity which controls inventory and controlling pricing through the marketplace. The ownership structure of these entities is not clear.Īccording to a section of industry observers, besides striking a blow to the large JV-seller entities, some of the other rules such as prohibiting e-commerce entities from striking exclusive deals with brands and manufacturers will suppress vendor autonomy.Īccording to Anil Talreja, partner at Deloitte India, the new norms will force such companies to restructure their JV seller entities. They also often deploy a strategy of deep discounting which has drawn the ire of small sellers.įlipkart, however, is believed to have gradually reduced dependence on big sellers like WS Retail and OmniTech Retail. E-commerce companies such as Paytm Mall, Snapdeal and ShopClues operate as pure-play marketplaces, where they merely serve as a platform for buyers and sellers without storing goods.Īmazon and Flipkart, on the other hand, have affiliated sellers and joint ventures (JV) via which they sell a large chunk of goods on their respective platforms.
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