Ama­zon May Have to Shorten its Tail Soon Govt says no ven­dor can ac­count for over a 4th of to­tal sales, but Cloud­tail may be do­ing it

The Economic Times - - Companies & Economy - Ra­sul.Bailay @times­group.com

New Delhi: 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. 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 awa-

To exit Cloud­tail

To bring Cloud­tail’s share on Ama­zon’s plat­form in line with 25% cap on to­tal sales re of the devel­op­ment. ET had seen a draft ver­sion of the let­ter.

“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.”

Clould­tail 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 (SEC) at the end of June, said one of the per­sons cited above.

In the last one year or so, Ama­zon has in­vested around .₹ 4,800 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 $6070 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.

In the last one year , Ama­zon has in­vested 4,800 crore in the flag­ship Ama­zon Seller Ser­vices as it looks to cap­i­talise on the boom in the coun­try’s ecom­merce

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