New norms may freeze Flipkart, Amazon models

blr_p

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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.
I see I took it as sales volume.

Specifically, the government banned online retailers Flipkart and Amazon from sourcing more than 25 percent of their inventory from a single vendor -- many of them in which these retailing giants hold stakes.
Sellers like cloudtail & Appario amounting to 25% or more of amazon's sales ?

Otherwise this move is targeting online sales.

In effect its limiting inventory of online sales to be just 25% ? seems a bit small.

It's pro bricks and mortar in other words
 

Michael Simeonovitch

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I see I took it as sales volume.


Sellers like cloudtail & Appario amounting to 25% or more of amazon's sales ?

Otherwise this move is targeting online sales.

In effect its limiting inventory of online sales to be just 25% ? seems a bit small.

It's pro bricks and mortar in other words
Not Amazon's sales.
Their own sales.

Lets say Cloudtail decides to open showrooms, like lenskart, but still cant get their offline sales to over 75%.
They will still continue to be an vendor owned company.

For them to escape this law, the govt want cloudtail to open brick and mortar shops (thus hire people), and sell atleast 75% of their total volumes through such shops.
 

blr_p

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Not Amazon's sales.
Their own sales.

Lets say Cloudtail decides to open showrooms, like lenskart, but still cant get their offline sales to over 75%.
They will still continue to be an vendor owned company.

For them to escape this law, the govt want cloudtail to open brick and mortar shops (thus hire people), and sell atleast 75% of their total volumes through such shops.
ok, we're clear now.

What if its just an election ploy, from the zdnet article

"After all, India's massive general elections are just around the corner, and nothing rallies votes as well as national policy that defends the common man. So don't be too surprised if this position is dramatically reversed once again."

Having been vindicated, here's my corollary: Don't be too surprised if these e-commerce rules are once again flipped in the event that the BJP win the national election in April. With no further need for the common man if that happens, big business will be once again wooed with vigour while the small retailer will be hung out to dry.
This rule pretty much spells the end for online sales. We're going to turn the clock back to before flipkart & amazon ? really ?

Amazon invested $2bn in India less than six months ago. All gone for a toss ? hmm...
 

rdst_1

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This 25% limit is actually the most problematic clause. Because it doesn't make any sense and is detrimental to so many small startups, as others have pointed out, who sell only through online portals and use warehouse services provided by Amazon.
The thing is, that the protestors had a valid point that they have raised. Any e-commerce platform with controlling power of an Indian company and the rest as FDI can function both as a marketplace and a vendor. But any e-commerce company in which a foreign company has controlling interest has to function as just a marketplace. The people investing whether it is Amazon or Walmart knew that before they decided to invest in India.

I have heard that many small startups in the US, actually prefer to sell through their own website instead of Amazon and slowly guide the customers to their own sites. I am guessing small sellers in India will have to do the same thing. It would mean more expenses on SEO and Facebook ads. Some might not survive the transition.
 

blr_p

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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.
I'm coming to the conclusion the customer is no longer the king but rather it is the shareholder.

Consider the anti-customer practice that Apple is pioneering. Got rid of the headphone jack. Why ? because now you have to buy a BT headset and that means a windfall for partners in that space. They broke an cross industry wide standard and you have to pay extra to fix it. Now this could have remained an Apple only thing except companies were only too happy to jump on the bandwagon once they saw the push back wasn't as bad as thought.
 
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blr_p

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I have heard that many small startups in the US, actually prefer to sell through their own website instead of Amazon and slowly guide the customers to their own sites. I am guessing small sellers in India will have to do the same thing. It would mean more expenses on SEO and Facebook ads. Some might not survive the transition.
They usually have better prices on those websites than amazon too. Some things i used to get off amazon US no longer sell there any longer. It makes looking for things harder as you have to go digging for these products scattered all over the place. It makes buying harder as well as where are the user reviews for products sold on these sites. Non existent.
 
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How to explain this comment by the snapdeal founder ?

Surprisingly, Kunal Bahl, co-founder of Snapdeal, welcomed the new policy.

“Snapdeal welcomes updates to FDI policy on e-commerce. Marketplaces are meant for genuine, independent sellers, many of whom are MSMEs. These changes will enable a level- playing field for all sellers, helping them leverage the reach of e-commerce,” Bahl said on Twitter on Wednesday evening.
https://www.livemint.com/Industry/R5OXoHyAYa9l1RXck7fgpK/Blow-to-Flipkart-Amazon-as-govt-tightens-ecommerce-norms.html

If this ruling affects small as well as larger online sellers. In what way does this ruling help leverage the reach of e-commerce. It is patently anti-ecommerce.

Some thing tells me there are going to be amendments and this rule supposedly coming into force on Feb 1 might be amended. For now its a trial balloon.

The announcement of the policy evoked massive protests from executives of top e-commerce companies, who warned of a swift pushback. Top executives from both Flipkart and Amazon said they would lobby strongly to either have the new policy scrapped in its entirety or to have significant amendments made to it in order to ensure “minimum disruption to Indian e-commerce”.

Executives from both companies also claimed they were not consulted before the policy was issued by the government and that there had been no dialogue with commerce and industry minister Suresh Prabhu on this matter.

“This policy makes no sense and is utterly ridiculous. The way this new policy has been crafted shows a complete lack of understanding of the retail landscape in India and how it functions. We were not even consulted before this was issued,” said a top executive at Amazon, who requested anonymity.

Publicly, large e-commerce firms said little.

Flipkart did not immediately respond to a request for comment. “We are evaluating the circular,” said an Amazon spokesperson.
 

rdst_1

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The 25% rule makes no sense, because as a vendor, even if I list on 4-5 e-commerce platforms as well as sell through my own site or through B&M stores, there is no guarantee that sales will be divided equally through all channels. It all depends on the comfort of the customer and where he chooses to shop. Don't see how the policy makers could overlook such simple absurdity when they decided on such a restriction.
 
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rdst_1

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How to explain this comment by the snapdeal founder ?

[
He is definitely being short-sighted. Snapdeal will benefit in the short run, but as you have pointed out, the policy is actually anti e-commerce. Guess he is happy enough with his small win.
 
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Lord Nemesis

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Not Amazon's sales.
Their own sales.

Lets say Cloudtail decides to open showrooms, like lenskart, but still cant get their offline sales to over 75%.
They will still continue to be an vendor owned company.

For them to escape this law, the govt want cloudtail to open brick and mortar shops (thus hire people), and sell atleast 75% of their total volumes through such shops.
The govt doesn't want them to open B&M stores and in fact doesn't allow them to open stores even if they are willing. Any entity in which these companies have a stake directly or indirectly are outright banned from doing business. The 25% rule only applies to third party companies selling on these marketplaces. As I said, this is meant to be a trap to cripple their business. They won't be allowed to have exclusive sellers (even third party), free or priority shipping and Amazon Fulfilled/Flipkart Assured which will virtually cripple their business while a local player like reliance will be able to quickly build their market using the same.

This is why I always maintain that India is not a good place for any kind of business investment. Even the potential market due to over population does not justify it.
 

adventureguy

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I don't get the 25% rule either tbh. whole rule is a cluster**** and different newspaper has different information
 

Julian

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I'm coming to the conclusion the customer is no longer the king but rather it is the shareholder.

Consider the anti-customer practice that Apple is pioneering. Got rid of the headphone jack. Why ? because now you have to buy a BT headset and that means a windfall for partners in that space. They broke an cross industry wide standard and you have to pay extra to fix it. Now this could have remained an Apple only thing except companies were only too happy to jump on the bandwagon once they saw the push back wasn't as bad as thought.
Bingo!

Also, about Apple, yes everybody else is emulating them in not hesitating to screw customers over to increase their bottom line. But the funny thing is Apple is also emulating them in that they've gone from a new phone model every year or couple years to multiple models every year. Their development cycle is almost like all the rest now.
 

rdst_1

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What law stops cloudtail from opening a brick and mortar shop?
I don't think we have yet allowed FDI in retail sales yet, so Cloudtail can't open a B&M store even if they wanted to. Even the Bharti-Walmart venture was only allowed to open B2B stores. Same is the case with Metro. FDI is only allowed for B2B sales for now.

Also, the B&M protestors are now putting more and more pressure on manufacturers. Just read a news that most B&M stores and chains in south have decided and declared that they won't stock and sell any Bosch and Seimens products because of the sales they had on e-commerce platforms during Diwali and earlier. This, when Bosch has recently announced opening of a factory to manufacture refrigerators in India.
 

Lord Nemesis

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What law stops cloudtail from opening a brick and mortar shop?
FDI regulation coupled with the new e-com policy. Till now FDI regulations prevented these companies from going into retail market both online and offline. They got around it by setting up a separate isolated entity namely WSRetail and Cloudtail to handle the online retail business. The e-com policy now outlaws entity in which an FDI company has a stake in from doing retail business. So essentially that shuts down the possibility of doing retail business online or offline.

But what would these companies do under the circumstances? They will start making agreements with reputed third party sellers to sell exclusively on their platforms. In order to prevent that, the 25% rule was setup for these companies. So even if they have some reputed seller on board, Both Amazon and flipkart will not be able to hog more than 50% of their sales volumes. These sellers would be forced to sell on other platforms. So if/when reliance enters the market, they can hog a bigger chunk of the sales volume of these sellers since they won't have the same restrictions.
 

Michael Simeonovitch

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Cloudtail India Private Limited is a Private incorporated on 04 October 2011. It is classified as Non-govt company and is registered at Registrar of Companies, Delhi.

Office :
H-9, Block B-1, Tughlaqabad Extension, Mohan Cooperative Industrial Estate, Tughlakabad, New Delhi, Delhi 110044
 

rdst_1

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Cloudtail India Private Limited is a Private incorporated on 04 October 2011. It is classified as Non-govt company and is registered at Registrar of Companies, Delhi.

Office :
H-9, Block B-1, Tughlaqabad Extension, Mohan Cooperative Industrial Estate, Tughlakabad, New Delhi, Delhi 110044
So. It is a joint venture between Amazon and Narayan Murthy. What point are you not getting?
 

Lord Nemesis

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Amazon has a equity stake in both cloudtail and Appario. Cloudtail is a joint venture with Narayana murthy's Catamaran ventures and Appario is a joint venture with Patni group.