Amazon, Flipkart sales fall a third as FDI norms kick in

March 13, 2019 written by
amazon flipkart sales falla third as fdi norms kick in

It’s uncharted waters for eMarketplaces as new FDI rules take away a large chunk of their business. Amazon pulls down products from Shoppers Stop while Flipkart continues to sell via alpha sellers.

Online marketplaces Amazon and Flipkart have seen as much as a third of sales volume disappear on their platforms since the new foreign investment rules in ecommerce came into effect three days ago, people privy to the matter told ET.

The new regulations bar some of the business practices that foreign funded ecommerce companies followed, such as having a stake in companies that sold products on their platforms. The rules categorise sellers who drive more than 25% of their overall sales from a single marketplace as entities of that marketplace and bar them, too.

Since Friday, the platforms have pulled product listings from joint-venture and preferred sellers, and capped inventory, leading to fewer selections, higher prices, longer-thanusual delivery time, and a 25-35% fall in sales, the people said.

An Amazon spokesperson said: “All sellers make their own independent decisions of what to list and when and we cannot comment on that.”

Prior to the change in the FDI rules, both Amazon and Flipkart drove more than half the sales on their platforms either through captive sellers, like Cloudtail and Appario for Amazon, or indirectly through their wholesale units. Their business-to-business units — Amazon Wholesale and Flipkart India — were suppliers to the e-tailers’preferred vendors. A Barclays report in November estimated sales by Amazon’s B2B arm in FY18 at $1.9 billion, and that by Flipkart unit at $3.3 billion.

“Restructuring at both companies is on as we speak,” said a person aware of the changes. The impact of the new rules on these companies is much more than that from the introduction of goods and services tax which had impacted the whole retail economy, he said.

Since Friday, Amazon’s private labels like Symbol, Myx, Solimo and Basics are unavailable as they are sold exclusively by Cloudtail and Appario, both partly owned by Amazon. The ecommerce giant also delisted products sold by Shoppers Stop, in which it had taken a 5% stake in September 2017.

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