FDI in e-commerce: Amazon, Flipkart keep options open as time is ticking

Online marketplaces like Amazon and Flipkart might have to do away with up to 30% of sellers under the new norms

Amazon India and Walmart-owned Flipkart are running pillar to post in a final effort to get an extension on the February 1 (Friday) date for a new set of rules on foreign direct investment (FDI) in e-commerce. 

If their effort fails, both firms believe, they might have to cut the nu­m­bers of sellers on their platforms (a million combined) by as much as 30 per cent. 

Top executives and public policy heads from Amazon India and Walmart are camped in this capital city, in hope of cajoling the government to as much as six months more. However, both are also working hard to become compliant with the new rules, in case this is what they will have to do.

Business development teams in both are on high alert and coming up with alternative sales strategies. Starting from working with sellers to ensure compliance, to informing certain vendors to stop selling on the platform from Friday, doomsday preparations are on. 

“It will affect offerings on the platform. Over­nig­ht, as well, a chunk of sell­ers would be barred from selling. We are looking at slashing the number of sellers by as much as 30 per cent,” said a senior vice-president at one of them.

Both India-based retailers and major e-commerce entities remain confused over the scope of the rules in question, after a series of policy changes by the government. The initial rules issued by the department of industrial policy and promotion (DIPP) had tightened on FDI in the e-commerce space. It had sought to restrict moves such as flash sales and deep discounting, also banning the sale of private labels on such platforms.

Kalyan Krishnamurthy, chief executive at Flipkart, has asked for more time, says news agency Reuters, to assess the ramifications. “Redesigning nu­merous elements of our technology systems to ensure we can validate and evidence our compliance, in such a compressed period of time, has caused us to divert significant resources,” he had reportedly written. 

Sources said officials from Amazon and Flipklart had met commerce minister Suresh Prabhu, beside DIPP secretary Ramesh Abhishek and Niti Aayog chief executive Amit­abh Kant. Rival trader bodies are planning to lobby for the opposite case. 

“We will meet the DIPP secretary and commerce minister, and spare no efforts in ensuring the policy kicks in. There is no logic in extending the deadline. If the online players claim they do not understand the fine points of the rules, we are prepared to help them understand it. If the policy is delayed, we will go against the government,” said Praveen Khandelwal, secretary-general of the Confedera­tion of All India Traders. 

Amazon India and Flipkart together have around 30 private labels, covering 200 different categories. And, claim to have spent a cumulative $1.5 billion (a little over Rs 10,000 crore) in India to expand their private labels, with major expansion plans in the pipeline.