Amazon, Walmart’s Flipkart and the other online marketplace can ask the government to make the recent changes in the Foreign Direct Investment (FDI) rules for e-commerce have not been implemented since February 1. People familiar with the matter told that these companies say that changing business models in such a short time is not easy, so deadlines will be moved.
Source said, “Companies must study the latest provisions in detail. According to them, there may be major changes at the operational level. ‘ He said that a month’s time will not be enough for this. Amazon and FlipKart did not respond to media questions in this regard. Many of these changes were announced on December 26.
People said that there are two clauses in particular, which will cause major changes. Firstly, in any vendor the marketplace or its group companies can not have equity stake. The second clause is that if the vendor purchases more than 25 percent of the marketplace with the unit of the wholesale unit, it will be assumed that the marketplace control is on the vendor’s inventory. According to FDI rules, marketplace entity or its group companies can not control inventory.
Amazon and Flipkart hold direct or indirect control over inventory. They make bulk purchases through their wholesale units ie Amazon wholesale and Flipkart India Pvt Ltd at cheap rates and they sell the goods on their marketplaces through Preferred Sellers. There are also companies in these sellers, which may be the steak of the e-commerce company or its group entity.
For example, Cloudtail is fully owned by Prion Business Services. Prion Business Services is actually the founder of Amazon and Infosys’s N. R. Narayana Murthy’s Catamaran India is a 49% joint venture with 51% stake. There are also many other companies. Flipkart has five big sellers, who buy all the products from its wholesale unit. About 70-80 percent of the total sales in these marketplaces are from these preferred sellers.
Flipkart had repeated that he would follow Indian rules. The company said, “We are committed to the Indian market. It is important to make a market-based framework through discussions. We hope that we will be able to work together with the government to promote such policy for fair and growth-enhancing policies, which will continue to grow this new sector and India will become a competitive economy. ”
Amazon has also said that he will continue to follow the rules of India. Both companies are making their own strategies and they can keep their issues separate to the government soon.