Amazon, the global e-commerce giant, has expressed satisfaction on the new regulations regarding online marketplaces issued by the government recently and vowed to continue with its investments in the Indian market.
The global online retailer during a conference call with financial analysts following its latest quarterly results said they were happy with the recent clarifications on FDI in e-commerce in India. “We are happy to operate in any regime and frankly more clarity it is better,” said, Phil Hardin, head – investor relations, Amazon.
The new norms for FDI in e-commerce by the government has clearly defined a online marketplace but brought in two clauses which could act as an impediment. Firstly, it has prohibited any inventory led operations by a pure play e-commerce player and secondly, a seller cannot have more than 25% share on these platforms. Besides, the e-commerce players cannot provide deep price discounts on their platforms.
These clauses have led to the reworking of the business model of the e-commerce players like Amazon and Flipkart, which have an inventory led model and a single player contributing more than 25% of its sales. In the case of Amazon, the majority seller on its platform is cloudtail while it is WS Retail for Flipkart. This could also mean a halt of their discounting models, which has been their main driving force to generate sales.
However, despite this regulatory environment, Amazon is going ahead with its investments in the country. Brian Olsavsky, chief financial officer, Amazon said, “We are solidifying and increasing our investments in India on all fronts. It is very exciting times in India.”
Amazon in July 2014 had committed an investment of $2 billion in India and this included expanding its back-end operations while also introducing new kind of services. It also recently announced a large fulfilment centre in Telengana.
As the Amazon CFO said, “We are inventing things in India that does not exist in other parts of the world.” Amazon has been locked in very fierce competition with the home-grown e-commerce player Flipkart and indications are that global retailer has gained an upper hand in terms of the growth rate.