Amazon’s private label products such as Amazon Echo, Fire TV Stick, Kindle, Solimo, etc no longer run the risk of discontinuation on Amazon.com
Amazon’s private label products such as Amazon Echo, Fire TV Stick, Kindle, Solimo, etc no longer run the risk of discontinuation on Amazon.com, after the government cleared confusion about implications of the new FDI rules, which had tightened the norms for e-commerce sites. However, customers still need to take note that the deep discounts offered by e-tailers might become a thing of the past, Satish Meena, senior forecast analyst, Forrester, told FE Online.
The clarification issued on 4 January by the Ministry of Commerce and Industry brings major relief for the e-commerce sites, however, their customers may still find themselves in a fix. The e-commerce companies such as Amazon and Flipkart are not barred from listing or selling their own products on their respective sites/apps, contrary to the earlier interpretation of the new FDI rules announced in late December.
In-house brands: Kindle and Echo not to be put off site
Amazon’s in-house products like Kindle and Echo and their utensil brand Solimo were on the radar earlier according the new FDI rules, with Amazon having a direct equity stake in these products. However, Satish Meena said the clarification gives these companies a way out to sell their own products on their own platforms.
The new FDI rules had closed a loophole exploited by e-commerce sites regarding holding equity stakes in the products sold on their sites, Satish Meena said. With the clarification, the gap has been reopened to some extent, to allow some space to the e-tailers, he added.
Amazon Prime, Flipkart Plus subscriptions to stay
Earlier, there was speculation that the Amazon’s Prime and Flipkart Plus will no longer be allowed to continue as the new FDI rules sought to promote fair and non-discriminatory trade. The rules asked e-commerce sites to provide “services which include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc” to every vendor. However, there will be no impact on Amazon Prime and Flipkart Plus, said Satish Meena.
Deep discounts to end; Flash sales, Big Billion days might stay
Talking about the fate of flash sales and Flipkart’s and Amazon’s festive Big billion day and The Great Indian Sale, he said, “We see no change on Flipkart’s Big Billion Day event as this is a routine exercise by retailers and every retailer does this online or offline to bring traffic and to push customer towards purchasing on their platform.”
Nevertheless, the retailers will reduce the discounting to take care of profitability and this is already happening in the market as the level of discounts is reduced in e-Commerce, he added.
Exclusive deals in soup, no significant change in cashback schemes
The cashback schemes and exclusive releases, which had become new marketing norm, were also expected to bear the brunt of the new changes. However, Satish Meena said that the ruling related to exclusive release might either be diluted or companies will make changes in the wordings of agreement to launch products on eCommerce platforms as every seller has the right to pick preferred retailer for the products they are selling. Regarding cashbacks, he doesn’t see things changing significantly.
Major changes to be incorporated by e-tailers
A significant part of the problem is solved for eCommerce players after the clarification. This might force them to sell more private label goods on their platform instead of working with sellers in various categories. The part where e-Commerce players are not allowed to sell products from companies in which they own equity is going to take some time for players to adjust with the new structure, Satish Meena said.
As of now both Flipkart and Amazon are dependent on players like Cloudtail and Retailnet in which they own equity stakes. For the time being, consumers might face issues in terms of high cost, declining customer experience and reduced ‘stock keeping unit’ during this transition time.
- By Prachi Gupta