Amazon brings biggest seller back by changing its business structure

Chennai: India’s modified foreign direct investment rules saw Amazon, among others get hit hard as the rules prevented companies from selling products from vendors where they, or their group companies, have equity holdings.

The firms including Amazon and Flipkart were looking to change their management structure so as to allow for their vendors to list their products on their websites.

The new rules were introduced after complaints from small Indian traders who said Amazon and Walmart-owned online retailer Flipkart used their control over inventory from affiliated vendors to unfairly offer discounts.

Back to base

Now, it has been reported that one of the biggest sellers on Amazon.com Inc’s India website has returned after the online retail giant changed its business structures to comply with new federal e-commerce curbs that took effect last week.

According to reports, Amazon was forced to remove hundreds of thousands of items sold by top vendors Cloudtail and Appario as it indirectly held 49 per cent equity stakes in both firms.

But on Thursday Cloudtail had returned with more than three lakh products listed on Amazon, after the US e-commerce firm cut its indirect holding to 24 per cent, Reuters reported.

“We have no equity participation in any seller company on our marketplace,” Amazon said in a statement, without sharing details of the changes in its indirect holding of Cloudtail.

Sources had stated to the entity that the stake was bought by the majority holders, Catamaran Ventures. Catamaran, an investment firm launched by Infosys founder NR Narayana Murthy, said it had made ‘required changes’ to comply with the rules.

Amazon is working on a similar restructuring for the other big seller, Appario, reports stated.

Bending rules

The Confederation of All India Traders (CAIT), which has pushed for tougher scrutiny of e-commerce players, on Thursday alleged Amazon’s latest move was a circumvention of the new rules.

The group is set to ask India’s industries department to clarify that online retailers should not hold direct or indirect stakes in their vendors, CAIT has stated.

Short run for Walmart?
Retail giant Walmart may exit Flipkart after India’s new Foreign Direct Investment (FDI) norms for e-commerce companies came into force, US investment banker Morgan Stanley has warned.

“An exit is likely, not completely out of the question, with the Indian e-commerce market becoming more complicated,” a report from Morgan Stanley said.

“There is a precedent for an exit as Amazon retreated from China in late 2017 after seeing that the model no longer worked for them,” the report read.

“We estimate that Flipkart derives 50 per cent of its revenue from this category, meaning Flipkart could face meaningful disruption and top-line pressure in the near term,” it added.

 

NT Bureau