Recent changes in the Foreign Direct Investment (FDI) guidelines for e-commerce companies have raised questions about the company related to Amazon India’s food business. It will also affect Amazon’s current business model. Sources said that Amazon is taking legal opinion that Amazon Retail India Private Limited can continue to sell on its platform or it will be closed after the new guidelines are effective from February 1.
The unit, which has a full share of Amazon, got the approval of $ 500 million investment in a food business company in July 2017. This company has been allowed to sell sourcing through physical stores and e-commerce of food products. However, in the new FDI policy for e-commerce announced last week, e-commerce companies with foreign funding have been banned from selling any company’s products in which its equity shares are held.
A source associated with Amazon said, “There is confusion about the new guidelines. Everything is quite complicated. Does this mean that Amazon can not invest in a retail company? On asking if ARIPL could sell Amzaon India platform after February 1, he said, “I do not know this.”
ARIPL has started selling products on Amazon.in a few months ago. The beginning of its business was delayed by more than a year because the government had told Amazon that it kept a distance between the company associated with its marketplace and food business. The condition of separate equipment, machinery and warehouse for both companies was laid.
Amazon says that more than four lakh small and medium traders are present on the platform and the company has strong intention in India for its business. Amazon India spokesperson said, “We have always followed the laws of the country and we understand the new guidelines. If necessary, then we can ask for clarification from the government about this. ‘
The new policy will affect the business of Amazon and its competitor Walmart in India. Walmart has bought Flipkart for $ 16 billion in the country’s top e-commerce companies. Under the new rules, CloudTail will not be able to sell on Amazon’s marketplace from February. CloudTail is the biggest vendor on Amazon’s platform. Amazon has a stake in Cloudtail. Similarly, WalMart and its related companies will not be able to sell on Flipkart.