New e-commerce norms: Faced downtime but bounced back, says Amazon CFO

Seattle-based online retail major Amazon on Friday said it had to face downtime in India owing to recent changes in the country’s e-commerce regulations. While pointing out that it has bounced back since then, Brian T Olsavsky (pictured), senior vice president and chief financial officer of Amazon, said during an earnings call that the company had to make structural changes to  comply with all the new regulations in India. 

“There were a few days of downtime for some of our selection (in India). But for the full quarter, the impact was minimal and we're in compliance and we're very happy with the progress of the business in India,” said Olsavsky.

Like in the US, Amazon is pitted against Walmart, which acquired a majority in Flipkart last year in a $16-billon deal, to dominate the e-commerce market in India as well.  

On growth in the international region, the company said there was “noise in Q3 and Q4, with the timing of the Diwali holiday.” Olsavsky added the company feels “pretty good about the Q1 growth there, despite some downtime in India.”

The revised e-commerce policy, announced last December, had barred e-commerce players from selling products through entities in which they own a stake. Vendors were also not allowed to have more than 25 per cent of their revenues coming from a single platform.

The new rules, which came into effect from February 1, 2019, also stopped online retailers from selling goods exclusively on e-commerce platforms.

According to analysts, Amazon is expected to step up its investments in India, especially after its exit from China recently. 

“Their (Amazon’s) attention on India will continue, there is no doubt about it,” said Harminder Sahni, managing director of retail consultancy firm Wazir Advisors. “After having left China, they are investing heavily in India which is their largest market outside the US and it would continue to grow,” added Sahni.

Amazon has so far made over $5 billion investment in India. Some reports suggest that the company may have invested an additional $2 billion on top of that. Besides Walmart, Amazon is set to face competition from the yet to be launched e-commerce business of Reliance Industries. 

Amazon’s investment could possibly depend on how RIL rolls out its plan. “Earlier Amazon was announcing (investments) reacting basically to the fundraising of Flipkart. Now, I think, it would all be driven by Reliance’s (gameplan),” said Sahni of Wazir Advisors.

Last week, Walmart President and Chief Executive Officer Doug McMillon was in India. During his key meetings with top officials of Flipkart and its group companies Myntra and PhonePe, he’s learnt to have discussed the strategy to take on Amazon. 

While announcing its financials, Amazon on Friday also said the company was working on making its Prime free two-day shipping programme to be a free one-day shipping programme. “We're able to do this because we've spent 20-plus years expanding our fulfillment and logistics network; but this is still a big investment and a lot of work to do ahead of us,” said Olsavsky. 

In its Q2 guidance, Amazon has included approximately $800 million of incremental spend related to this programme. 

The company has been offering faster than two-day shipping only for its Prime members.

ACTION PLAN

| Has made structural changes to comply with India e-commerce regulations 

| Online retail giant is happy with the progress of business in India 

| It is planning to offer one-day free shipping to Prime customers, instead of free two-day shipping at present

| Company is likely to increase its investments in India, following its decision to exit China