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
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.