Amazon for FDI in front-end ops

US e-commerce player wants the govt to allow FDI in online retail

Within a year of launching a subsidiary, Junglee.com, a price comparison site in India, the world’s largest online retailer, Amazon.com, has sought a “relaxed” regulatory regime. The American e-commerce player wants the government to allow foreign direct investment (FDI) in online retail.

The government is looking at the matter, it is learnt, but there's still time before FDI is permitted in online retail.

Amazon has been eyeing the promising Indian market. Global Vice-President Paul E Misener met commerce and industry minister Anand Sharma today to discuss the online retailer’s interest in India.

“We talked about it (allowing FDI in e-commerce)," Misener told reporters. “We talked to the government officials on all kinds of issues.”

According to Misener, Amazon is trying to find a better way to serve its Indian customers, referring to both sellers and buyers. Amazon employs around 9,000 people in India. It has offices in Bangalore, Chennai and Hyderabad for building software and applications that support its websites globally.

On whether the government gave any assurance on opening FDI in online retail, this is what Misener had to say: “The government of India has been very kind to Amazon.com and we continue to grow here.”

In a blow to e-commerce companies, the government decided to keep FDI on hold in online B2C (business to consumer) retail in September 2012, while it allowed up to 51 per cent FDI in brick and mortar multibrand retail. There is no bar on FDI in B2B (business to business) or backend infrastructure in online retail, though.

In February 2012, Amazon brought Junglee.com into India, even as it kept up its hope of operating here on its own. However, the Cabinet decision to not allow FDI in online retail changed things for Amazon. Junglee.com, since it redirects traffic to other vendors including Amazon through its site, is not seen as a B2C company. Amazon had acquired Junglee about 14 years ago.

Domestic online major Flipkart restructured its format to comply with the FDI guidelines.

While top executives of international online retailers such as Amazon visited India to discuss regulatory norms, . The Indian e-commerce company offloaded its stake in its Bangalore-based front end company, WS Retail.

While the government may have initiated talks to relax the FDI norms in online retail, Arvind Singhal, founder and chairman of Technopak Advisors, a leading retail consultancy, is not convinced. “If the government could not iron out the challenges in traditional retail over so many years, where is the hope of settling things right for online retail?”