New norms may freeze Flipkart, Amazon models

Lord Nemesis

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I was browsing amazon for Note 9 the other day, and saw an amazon prime fulfilled offer by a seller called Samsung World Bhopal (dont remember exact).

So, for such sellers, which have a shop, and online presence, it is a boom, no?

I think this will enable more offline sellers to come online, rather than vice versa.
How and why would they be encouraged to come online? First of all, why would an offline retailer want to take his business online? Because somebody else is out there online taking away their sales. With majority of the online-only big retailers neutralized, what will drive the offline retailers given that they can evade taxes and dictate their own terms offline with little to no regulation in practice happening on them? Nothing. They may still maintain some online presence, but there is nothing to drive them online. Sure, increasing the reach a bonus, but at the end of the day, it all boils to sales volumes, if they can get fair volumes even with offline sales and with higher margins than usual, there is no motivation to jump online. So, yeah, while this may benefit them at the expense of customers, I don't see these rules being motivation for going online.[DOUBLEPOST=1546071855][/DOUBLEPOST]
No my frn Papu may get $$$ to resist it (defend it in LS/RS) always check both side of coin
So, you think Amazon or Flipkart will pay Pappu just to "resist" it rather than using that money to lobby with the govt directly? I think the people @ Amazon and Flipkart have better IQ and business sense.
 
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Lord Nemesis

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Don't ever think that they are making loss to make Indian Retail Buyers Happy or giving back to Indian Society.
If you really think any business is out there to make customers happy, you are in for a rude shock.

Flipkart is in losses of 25,000 crore. Amazon India is not far oof. No, they don't make losses to make Indian retail buyers happy. They make losses to build the value of their business up. Amazon global itself doesn't have profitability. The Amazon model itself is unique in the sense that it doesn't focus on profitability and Jeff Bezos himself stated that their model is not sustainable and that their goal is to only prolong the inevitable.
 
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yashvisent

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In my opinion these rules may be coming to help Reliance. Because there was this news some time back that reliance would foray in ecommerce in a big way, something in the lines of amazon and flipkart.

This set of rules will provide leverage to Reliance against Amazon and Filpkart.
 

blr_p

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What's more important, the welfare of the seller (offline or whatever) or of the consumer?
The small seller. This move will impact the bigger sellers as i suspected. This move was brought in to appease the small seller vote bank. The small seller is India Inc. Euphmestically referred to as the "unorganised" sector but in reality this sector is far more organised and faster moving than the "organised" sector aka govt.

https://www.zdnet.com/article/india-issues-new-e-commerce-rules-to-check-amazon-and-flipkart/

Also, does anyone know the margins of consumer electronics at every point in the supply chain?
If its an imported item check the wholeslae price on zauba or similar shipping site

For flagship phones its typically 100% from import by the thousand to retail selling price. That is the flagship you buy costs double what it cost to import in bulk. This is the point before the distributor gets it.

Whether there is under invoicing i don't know. With make in India the difference will be less.[DOUBLEPOST=1546080068][/DOUBLEPOST]
They found a nice way to kill of a vast majority of small businesses that operate exclusively on online marketplaces.
See, this was the comment that tripped me up. Completely wrong. Why would the govt go against the small seller !!

It is designed to do exactly the opposite. Go after the big seller particularly those that have more than 25% of the total inventory sold. It is to prevent the big retailers that can borrow at half the rate compared to the small seller.

This borrowing rate is precisely why the govt perpetually fights with the RBI. Bring down the cost of borrowing is business friendly but it risks overheating the economy and causing inflation to rise or what UPA2 did.

Was listening to this talk by a prof. His economic indicator for well being is to watch his flower seller. If she has gold bangles then the economy is doing well. Less bangles not so good and no finally no bangles means bad. Economic theories that hold in the west frequently do not work in India. Gold may be sunken wealth in the west but in India it serves as collateral. Not sunken wealth. Operating wealth.[DOUBLEPOST=1546083497][/DOUBLEPOST]https://www.zdnet.com/article/will-flipkart-and-amazon-kill-indias-retail-industry/
 
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6pack

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It is designed to do exactly the opposite. Go after the big seller particularly those that have more than 25% of the total inventory sold. It is to prevent the big retailers that can borrow at half the rate compared to the small seller.
Just read the entire thread again.

laws are made for all even if it was designed with big sellers in mind. The law will be same for small seller or big seller. It's not going to differentiate when they're going to take action. No officer is going to tell a seller - "Oh you're a small fry and can only afford to sell 100% on Amazon. No fine for you. You can go away." Nah. They fine first then talk later after getting the money. You must have gone to govt offices to know how they work. Mindlessly.
 

Michael Simeonovitch

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How and why would they be encouraged to come online? First of all, why would an offline retailer want to take his business online? Because somebody else is out there online taking away their sales. With majority of the online-only big retailers neutralized, what will drive the offline retailers given that they can evade taxes and dictate their own terms offline with little to no regulation in practice happening on them? Nothing. They may still maintain some online presence, but there is nothing to drive them online. Sure, increasing the reach a bonus, but at the end of the day, it all boils to sales volumes, if they can get fair volumes even with offline sales and with higher margins than usual, there is no motivation to jump online. So, yeah, while this may benefit them at the expense of customers, I don't see these rules being motivation for going online.[DOUBLEPOST=1546071855][/DOUBLEPOST]
Lets say you have a shop.
You are scared for online presence, because you cant compete with big players like Cloudtail.
Once these big players get restrained, you will be incetivized to dip your toes in the online space, no?

Did I say "EXCLUSIVELY" online? No. Online presence along with his shop.
 

Michael Simeonovitch

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See, this was the comment that tripped me up. Completely wrong. Why would the govt go against the small seller !!

It is designed to do exactly the opposite. Go after the big seller particularly those that have more than 25% of the total inventory sold. It is to prevent the big retailers that can borrow at half the rate compared to the small seller.

I think there's a slight communication gap here, blr_p

"Inventory of a vendor will be deemed to be controlled by ecommerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies, said the updated Press Note "


That means that if, say a seller sells 100 units of item X, if 26% of them are sold online, and say 74% of them through his shop, he will be considered a marketplace entity.

Which means small businesses, with an online only model, lets say all those businesses launched on Amazon Launchpad, RIP to them.
 

Julian

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When someone SET to destroy EVIL, in such process, some time good people also suffered for benefit of ALL.
Sorry to have to break it to you this way, but once people take off their religion blinders, they will realise that you can't 'destroy' evil because it doesn't exist tangibly. Good and evil are simply emotions that exist in and manifest out of the hearts (minds) of men.

The small seller...
So you would say that small sellers deserve better than the consumer? For whom they exist in the first place?

What's the reality in developed countries like the US? Even though Amazon is perpetually loss-making, every single person there has the option to buy stuff online, and you get EVERYTHING online there. Unlike here. And still their offline industry cannot be decimated because people love to shop too. So both models are working somewhat in tandem, and the govt gets taxes from both so they aren't bothered.

But here it's a small fraction of the population that shops online, and that too for specific types of products.

Every govt in India just keeps retarded regulations and restrictions, some may say, with good intentions, but all this does is slow progress. This isn't really being liberal.
 

Lord Nemesis

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Lets say you have a shop.
You are scared for online presence, because you cant compete with big players like Cloudtail.
Once these big players get restrained, you will be incetivized to dip your toes in the online space, no?

Did I say "EXCLUSIVELY" online? No. Online presence along with his shop.

Lets say you have a shop selling say printers. You are already competing with Cloudtail and WS Retail whether you are online or not and and whether you like it or not.

Offline sellers venture online because online retailers are taking away their offline sales. Every online sale is taking away a potential offline sale. So, the notion of being scared of online retailers and hence not competing online is absurd since they are already being forced to compete whether they are present online or not and whether they like it or not. Its not like these are two are completely isolated and independent markets.

Most offline retailers would not bother with online at all if consumers options are restricted and online buying is made expensive. For them too, online presence on these platforms comes at the expense of more tax compliance, paying commissions etc and thy won't do it unless there is a strong incentive like some other retailer eating away into their sales.

I am not talking about exclusive online business either. There would be no incentive to make their business online enabled if there is no strong incentive. Wider reach is one incentive, but the retailer will have to weigh the cost it comes at.
 
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Michael Simeonovitch

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Lets say you have a shop selling say printers. You are already competing with Cloudtail and WS Retail whether you are online or not and and whether you like it or not. Correct.

Offline sellers venture online because online retailers are taking away their offline sales. Every online sale is taking away a potential offline sale. So, the notion of being scared of online retailers and hence not competing online is absurd since they are already being forced to compete whether they are present online or not and whether they like it or not. Its not like these are two are completely isolated and independent markets.

Most offline retailers would not bother with online at all if consumers options are restricted and online buying is made expensive. For them too, online presence on these platforms comes at the expense of more tax compliance, paying commissions etc and thy won't do it unless there is a strong incentive like some other retailer eating away into their sales.

I am not talking about exclusive online business either. There would be no incentive to make their business online enabled if there is no strong incentive. Wider reach is one incentive, but the retailer will have to weigh the cost it comes at.
Para 1 correct. Agreed.

Para 2.
Offline sellers venture online because online retailers are taking away their offline sales. Correct.
Every online sale is taking away a potential offline sale. Correct
So, the notion of being scared of online retailers and hence not competing online is absurd since they are already being forced to compete whether they are present online or not and whether they like it or not. Scared as in unable to compete volume handling wise, or retail price wise.
Its not like these are two are completely isolated and independent markets. Correct.

Para 3 and 4. Agreed.



Here is my TL;DR in this discussion.

Govt wants Flipkart and Amazon to become like Swiggy (or ebay, for that matter). Dont sell anything, just provide a platform.
 

rdst_1

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Here is my TL;DR in this discussion.

Govt wants Flipkart and Amazon to become like Swiggy (or ebay, for that matter). Dont sell anything, just provide a platform.
That was the condition that was put in place when 100% FDI was allowed in e-commerce. They are now trying to enforce it properly by covering the loopholes. The trouble is that the new wording seems to be detrimental to Indian sellers/companies as well. The wording should have been such that would have placed restricitions only on sellers/companies in which Amazon/Flipkart/100% FDI E-com platform had a stake in and not on other sellers.
 
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Michael Simeonovitch

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That was the condition that was put in place when 100% FDI was allowed in e-commerce. They are now trying to enforce it properly by covering the loopholes. The trouble is that the new wording seems to be detrimental to Indian sellers/companies as well. The wording should have been such that would have placed restricitions only on sellers/companies in which Amazon/Flipkart/100% FDI E-com platform had a stake in and not on other sellers.
I know.
I dont like this move, as a consumer as well.
But then, that is life/
 

Lord Nemesis

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That was the condition that was put in place when 100% FDI was allowed in e-commerce. They are now trying to enforce it properly by covering the loopholes. The trouble is that the new wording seems to be detrimental to Indian sellers/companies as well. The wording should have been such that would have placed restricitions only on sellers/companies in which Amazon/Flipkart/100% FDI E-com platform had a stake in and not on other sellers.
I seriously doubt its about plugging in loopholes or trouble with unintentional wording. I think its fully intentional. WSRetail, Cloudtail etc have 100% of their sales on a single platform. So, why the 25% rule? They wanted to cripple any Indian online retailers with a fair share of business on any of these platforms They wanted to ensure that there is no retailer prominently on a single platform lending advantage to it. This will benefit the offline retailer lobby as well, but more importantly, it is more than likely to be ground work being done to give a major advantage to Reliance when it enters the e-com business. What will Amazon or Flipkart do after Cloudtai/WSRetail get banned? They will likely make arrangements with some quality third party sellers to become exclusive to their platform. With the 25% rule, the retailers will have to spread their business across multiple platforms and thus none of the existing e-com companies will have an advantage in terms of sellers putting them at a severe disadvantage when Reliance enters the market.

Another point to note is that these new regulations also ban programs like the "Amazon Fulfilled" and "Flipkart Assured" programs as well which fits in with the theme in general. Below are other key points

1. No exclusive sellers on any platform and product exclusivity also severely hampered.
2. No "Amazon Fulfilled" or "Flipkart Assured" like programs
3. No free shipping
4. No Priority delivery options

Basically, all the key benefits will be neutralized. So, its essentially about crippling the existing platforms to the point that consumers have no advantage buying on them.
 

rdst_1

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Reliance won't be a 100% FDI company so none of these restrictions will apply to them. That will definitely see sellers move over to their e-commerce venture.
 
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Lord Nemesis

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Many of the rules like 25% limit, restriction on free shipping etc are only applicable on FDI based e-com market places that exist current. They won't be applicable on reliance if they don't rely on FDI. That's why I think these rules are more than about helping the offline retail lobby.
 
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Michael Simeonovitch

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1. No exclusive sellers on any platform and product exclusivity also severely hampered.
2. No "Amazon Fulfilled" or "Flipkart Assured" like programs
3. No free shipping
4. No Priority delivery options

Basically, all the key benefits will be neutralized. So, its essentially about crippling the existing platforms to the point that consumers have no advantage buying on them.
Uhhhhhhhh

You got a link?
 

Lord Nemesis

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There was one article which summarized all the changes, but cannot find the link now. Here is one which covers 1,3 &4. But rest assured, 2 is also there in the list. I am trying to find the source for it.

https://www.gadgetsnow.com/tech-news/why-it-may-not-be-a-very-happy-new-year-for-amazon-and-flipkart/articleshow/67271608.cms[DOUBLEPOST=1546152206][/DOUBLEPOST]One more link different than the one I read earlier, but summarizes impact areas.

https://economictimes.indiatimes.com/news/economy/policy/government-tighten-norms-for-e-commerce-companies-for-sale-of-products/articleshow/67258251.cms




Just for clarity. many of the rules are specifically for FDI e-com and meant to amend FDI legislation.
 
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Julian

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"Things first got stirred up earlier this April when a retail association that included small shops as well as behemoths Future Group and Reliance dispatched a letter to Suresh Prabhu, minister of Commerce & Industry, alleging that many of India's e-commerce players were flouting India's foreign investment regulations by influencing prices on their platforms, which is contrary to what is permitted under a marketplace model."

:rolleyes:

It's also hypocritical of offline retailers to be whining about FK and AMZ discounts. If it comes to it and a customer in their store is bargaining hard, you will be shocked at how much they discount. Gives an idea of the huge margins they have. Of course i'm not considering their overheads in running a physical store with staff etc. but still. They're just sore because they want to keep fleecing people. Just like AVoId did when jio first came out.

In the retail industry consumer is king, and whatever is done to benefit them is fine i would say, as long as it isn't illegal. Who cares about the ethics, because who the heck is etchical and honest these days? It's naive to be talking about fair play in this materialistic BS society ours has become today.[DOUBLEPOST=1546152809][/DOUBLEPOST]Just look at the crap being pulled by 3rd party sellers, an example is right here on TE. If i had a choice i would completely ban 3rd party marketplace sellers and have each site sell their own stuff. That would increase accountability and improve quality and pricing to customers.
 
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