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Amazon to play by India's e-commerce rules, invest heavily here

But firm offers no clarity on how it would reduce share of subsidiary Cloudtail in Amazon's India sales

Alnoor Peermohamed  |  Bengaluru 

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Global e-commerce giant Amazon, investing heavily in India, says it will go by the e-commerce rules here that prohibit online marketplaces from offering discounts and restrict sales from their captive units to 25 per cent, even as it invests heavily to take on local competitors Snapdeal and Flipkart.

Amazon broke its silence exactly a month after India came up with rules that allow 100 per cent foreign direct investment in e-commerce marketplaces but with riders to offer level playing fields to traditional retailers.

“We’re happy to see the recent clarifications. We’re happy to operate in any regime and the more clarity, the better,” said Phil Hardin, head of investor relations at Amazon, in a call with investors to discuss the company’s quarterly financial results.

Hardin skirted questions on how it would manage Cloudtail’s business and did not elaborate on whether Amazon had begun complying with the new rules. Cloudtail is Amazon's joint venture with Catamaran Ventures, personal investment arm of Infosys founder N R Narayana Murthy, which is the largest vendor to sell goods on the platform.

Amazon is engaged in a battle with Flipkart and Snapdeal, which is backed by Chinese e-commerce player Alibaba, to capture a slice of India’s fledgling e-commerce market. Alibaba, which dominates China, has also announced it also wants to go solo in India, adopting a three-pronged attack strategy with Paytm and Snapdeal to increase its presence in India. Flipkart, trying to raise the additional money needed to fend of its rivals, has seen senior executives quit, valuations come down and an organisation rejig. The company, among the most vocal in India’s e-commerce sector, is trying to focus on retaining its dominant market share amid increasing competition.

For now, most Indian e-commerce entities have put a halt on offering massive discounts and are focusing on improving customer service and logistics. This is seen to be helpful for both Flipkart and Snapdeal. Amazon, which has taken up an open chequebook policy for India, could be restricted to the third spot if it isn’t allowed to out-discount products on the other two sites.

All three have cancelled their seasonal sales, offering massive discounts to customers for short durations, to comply with the government’s rules. However, this will hurt Amazon the most, since it has the deepest pockets.

Amazon is, however, investing in India. In the January to March period, it said the margins on its international operations were lower than that in the US due to massive investments the company was making in India.

“We are making large investments in India and we’re excited with what we see and we will continue to heavily invest in India,” said Brian Olsavsky, chief financial officer. He said he'd just returned after spending a week in India, adding the company continues to invest on all fronts.

India is the last large opportunity globally for Amazon after conquering the US market and failing to make a dent in China.

"During the quarter, we rolled out a feature called Tatkal which is a studio on wheels that we go to sellers to help them sign up. We let them do registration, imaging, catalog, uploads and basic seller training. So, we're taking it to the sellers, taking the business to the sellers," said Olasavsky.

  • 100% foreign direct investment
  • 25% cap on sales from in-house sellers

First Published: Sat, April 30 2016. 00:44 IST