The Government of India, through the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry, recently modified the policy of Foreign Direct Investment in India by issuing a press note. From February 1, 2019, E-commerce companies running marketplace platforms such as Amazon & Flipkart, cannot sell products through companies, and of companies, in which they hold an equity stake. To curb deep discounts, the government said they cannot directly or indirectly influence the price of goods and services. And also brought in a new set of rules that bar the sale of products exclusively in one marketplace.
Amazon and Flipkart Hugely Affected:
As a result, Amazon Pulled Off Cloudtail, Appario Retail and other sellers where Amazon was a Joint Ventures Partner. Those sellers were among the Top 20 Largest Amazon Sellers globally. They moved more than 50% of Amazon’s shipment volumes including Mobiles, Electronics, Grocery, and Fashion items, that has now become unavailable to buy in the platform.
Although, Flipkart did not have such a big effect as Amazon immediately, as they do not own any shares in any of its large sellers. Except for WS Retail, which already stopped selling on Flipkart.
But soon, Flipkart will also get into issues as their existing inventory stocks out and they need to restructure their agreements with brands, as they can’t have exclusive partnerships with any brands. (eg: Google Home Mini).
Now customers need to wait for 4-7 Days for their products to arrive at their home. As the major sellers shipping goods faster are now gone, small sellers with limited stocks are the only available resources. In many cases, the sellers are not from FBA (Fulfilled By Amazon) category. Hence, major stocks of Prime Fulfilled products have gone out of stock. The non-fulfilled sellers are also charging additional costs for delivery, which is adding up to a price higher than the market price.
As per new rule, Amazon can’t sell their own products like Amazon Echo Dot exclusively via their own sellers. It is now up to the 3rd Party sellers what product to list, and what not to list. So, although many 3rd Party FBA Sellers listed Amazon Products, the estimated time of delivery went up to 45 days due to low stocks.
Amazon Prime Subscription Price Might Soon be Reduced:
Amazon pulled off Amazon Pantry section carrying monthly groceries. They also removed the ‘Now Store’ run by Cloudtail, inside the ‘Prime Now’ app that offered 2-Hour Delivery to Amazon Prime customers on different products in selected cities. Prime Subscriptions are also going to get hampered due to the new FDI Policy. Amazon India offered Free Delivery and Faster Delivery Options for major popular products which have now gone away. Now Store and Amazon Pantry have gone away.
Hence, there’s a chance of reducing prime subscription costs if the situation doesn’t improve. Although the price would go down, it not a good thing for customers after all.
Both Flipkart and Amazon stated their dissatisfaction over the new FDI Rules. Flipkart issued a statement saying it was disappointed with the Govt’s move.
Brian Olsavsky, CFO at Amazon, said, ‘We have built our business around price selection and convenience. We don’t think the changes help in those dimensions for both customers and sellers in India‘. However, Amazon India will remain committed to complying with all laws and regulations of the Indian Govt.
This shows how serious the situation is, and, how it affects them as a marketplace, and you as a consumer.