New FDI rules: E-business companies re-align operations, many Amazon products go off platform

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New Delhi: e-commerce giants like Amazon and Flipkart backed by Walmart rushed to re-align their platforms to comply with the new FDI rules that went into effect on Friday. Amazon.in eliminated a series of products, including mobile accessories and batteries. , from your platform.

The new rules prohibit online markets that have foreign investments from offering products from sellers in which they have an interest. As a result, products from vendors such as Cloudtail and Appario, which have a capital investment from Amazon, have been removed from the Amazon platform.

A quick search of several ‘AmazonBasics’ products showed that the items were “currently unavailable”. Other Amazon products, such as the Echo smart speaker range, were initially removed but then returned to the platform through vendors such as Hariom Communication. The waiting period for Echo speakers is running anywhere from fifteen days to more than a month. Previously, some of these products were available for delivery within one or two days.

According to the sources, while Flipkart does not have shareholding in its vendors, the modified rules could affect the selection available on the platform in the coming weeks, since existing vendors purchase items from their wholesale unit.

Industry experts pointed out that many partnerships between these e-commerce giants and their vendors are being modified to ensure that online markets comply with the new rules. The new regulations, which were announced in December under Press Release 2, prohibit online markets with foreign investments to conclude exclusive marketing agreements.

Another clause establishes that the inventory of a supplier will be seen as controlled by a market, if more than 25 percent of the supplier’s purchases are from the market entity, including the wholesale unit of the latter. Flipkart, backed by US retail giant Walmart and endorsed on Friday, said it was disappointed with the Indian government’s decision to implement the rule changes for e-commerce companies with foreign investment in a hurry.

The Bengaluru-based company added that it remains committed to compliance “despite the important work that is required to change our supply chains and systems.” The Flipkart spokesman said that despite the important work required to change their supply chains and systems, the company remains confident that it will continue to serve its customers and vendors well.

In stating that the policy should be created in a consultative and market-oriented manner, Flipkart said he will continue working with the government “to promote fair and growth-friendly policies that will continue to develop this nascent sector.”

Despite the intense lobbying of the two giants, the Department of Promotion of Industry and Internal Commerce (DPIIT) said on Thursday that it had “decided, with the approval of the competent authority, not to extend the deadline” of February 1.

An Amazon spokesman said Thursday that the company will continue to work with the government to seek clarification and work to minimize the impact on its customers and sellers.

In the past, small merchants complained that the huge discounts offered by e-commerce companies were hurting their business. Several merchant organizations had also alleged that these entities were giving preferential treatment to certain sellers. During the last weeks, both Amazon and Flipkart had been exerting great pressure (both directly and through associations and commercial organizations) with government officials seeking an extension within the deadline. They had also written to the government stating that they need more time to understand the details of the new framework.

When batting for players, the Strategic Association Forum EE. US-India (USISPF) called the “new e-commerce rules” “regressive” and said that these changes would harm consumers, create unpredictability and have a negative impact on the growth of online retail in India.

According to a Crisil report, almost 35-40 percent of retail sales – amounting to Rs 35,000-40,000 crore – could be affected due to the stricter standards.

However, smaller players such as Snapdeal and ShopClues have welcomed the development, saying it will create a genuine and solid e-commerce sector in India.

According to the sources, both Flipkart and Amazon had high hopes that the government would soften their position.