Ecomm Cos may Fail to Meet Ven­dor Sales Norm This Year

Top on­line mar­ket­places like Ama­zon and Oth­ers may be able to cap sales by a ven­dor at 25% of to­tal sales at their plat­forms only by the end of the year

The Economic Times - - Front Page -

Ra­sul Bailay & Chaitali Chakravary

New Delhi: Lead­ing ecom­merce com­pa­nies may not be able to com­ply im­me­di­ately with the re­cent stip­u­la­tion to cap any ven­dor on their plat­forms at 25% of to­tal sales. They will only be able to do so af­ter the cur­rent fi­nan­cial year ends, said peo­ple aware of the mat­ter.

“It is an ac­count­ing is­sue that nor­mally has to be col­lated at the end of the fis­cal year,” said one of those cited above.“The 25% data can be given over a pe­riod of time and not im­me­di­ately.” The govern­ment last month le­galised the mar­ket­place mod­els op­er­ated by Ama­zon In­dia and home­grown ri­vals Flip­kart and Snapdeal, al­low­ing 100% for­eign in­vest­ment in such busi­nesses. Apart from the 25% re­stric­tion, they have to func­tion strictly as tech­nol­ogy plat­forms for buy­ers and sellers. The govern­ment had said the rule would take ef­fect on March 29, the day Press Note 3 was is­sued, leav­ing many ecom­merce com­pa­nies wor­ried about com­pli­ance, said those cited above. For ex­am­ple, both Ama­zon and Flip­kart have ven­dors that ex­ceed the 25% thresh­old on their plat­forms. One of the largest ven­dors on Ama­zon In­dia is Cloud­tail, owned by Pri­one Busi­ness Ser­vices, which is in turn held by Ama­zon Asia and Cata­ma­ran. Pol­icy Chal­lenge

In­dia an­nounces FDI guide­lines that re­stricted sales of any sin­gle ven­dor on for­eign-funded mar­ket­places to

of the sales at the plat­form

In­dia’s in­ter­net and ecom­merce lobby cir­cu­lates a draft let­ter that was seek­ing six months ex­ten­sion from the govern­ment to com­ply with the new guide­lines

The lobby junks the let­ter amid dif­fer­ences among ecom­merce com­pa­nies Ecom­merce cos separately ad­mit that com­pli­ance of 25% ven­dor cap pos­si­ble only by March 2017. Ecom­merce firms are frag­mented while brick-and-mor­tar com­pa­nies have a strong lobby group

The sales cap rule was to take ef­fect on March 29, the day the new norms were is­sued

Catara­man is the per­sonal in­vest­ment ve­hi­cle of In­fosys founder NR Narayana Murthy. “We would not like to spec­u­late on the share of Cloud­tail or any other seller till we close our books for the year and given how re­cent the Press Note 3 is,” an Ama­zon In­dia spokesper­son said in an emailed re­ply. “We will put a process in place to in­form sellers in case they are close to or likely to breach the 25% guid­ance.”

ET had re­ported last week that Flip­kart will dras­ti­cally scale down in the next 1218 months the con­tri­bu­tion of WS Re­tail, still the largest seller on its plat­form, to con­form to the new guide­lines.

“At Flip­kart, we have al­ways been com­pli­ant of all rules and reg­u­la­tions and will con­tinue to ad­here to the new guide­lines as well,” a Flip­kart spokesper­son said in an email with­out re­ply­ing to spe­cific ques­tions on the con­tri­bu­tion of WS Re­tail.

Snapdeal is fully com­pli­ant with the stip­u­la­tion, a spokesper­son said. “Snapdeal has nearly 300,000 sellers from across In­dia. Given the span and depth of our seller base, even the big­ger ones ac­count for much less than the 25% thresh­old man­dated for any sin­gle seller,” the per­son said. “Be­cause of the level of tech­nol­ogy em­bed­ded in our oper­a­tions, it is pos­si­ble to as­sess the on-go­ing vol­umes con­trib­uted by var­i­ous sellers and also make a range bound pro­jec­tion for the cur­rent year.”

There was an at­tempt at get­ting the In­ter­net and Mo­bile As­so­ci­a­tion of In­dia (IAMAI), a group that has mem­bers rang­ing from tech com­pa­nies to on­line re­tail­ers, to lobby the govern­ment over the new rules. Although a draft note ad­dressed to the DIPP had been pre­pared (see ET, April 4, 2016), a lack of con­sen­sus among the ecom­merce com­pa­nies led to the idea be­ing junked. The draft had sought time un­til Septem­ber to com­ply with new mar­ket­place rules.

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