Walmart, Amazon scrambling to comply with India’s e-commerce rules

Reuters
MUMBAI
Walmart Inc-owned Flipkart and Amazon.com Inc’s Indian unit are rushing to rejig ownership structures and rework some key vendor relationships, as they seek to comply with new Indian e-commerce curbs without disrupting their businesses.
In late December, India modified rules around foreign direct investment (FDI) in e-commerce, creating additional hurdles for the retail giants. The rules, which kick in on Friday, do not allow e-commerce sites to “exercise ownership or control over the inventory” of sellers.
India does not allow foreign investors to control and market their own inventory on their e-commerce platforms. They are only allowed to operate marketplace platforms where others sell goods to retail consumers.
Traders and rivals say companies such as Amazon and Flipkart have been violating the spirit of these rules by creating proxy sellers or vendors in which they have direct or indirect stakes, allowing firms to give deep discounts that upset off-line trade.
The All India Online Vendors Association, a group of about 3,500 online sellers, has accused both Flipkart and Amazon of using their dominant position to favour selected sellers. Amazon and Flipkart deny the accusations.
Both Amazon and Flipkart sought more time to comply with the new rules. But India said on Thursday, it had, after “due consideration” decided not to extend beyond February 1 the deadline for the implementation of the modified FDI norms.
In a letter to India’s industries department earlier this month, Flipkart Chief Executive Kalyan Krishnamurthy said the rules required it to assess “all elements” of its business operations, a source told Reuters previously.
The new rules, meant to close loopholes in the regulations, state that if any seller purchases more than 25 percent of its inventory from the wholesale units or other group companies of an e-commerce firm that runs an online marketplace, then that vendor’s inventory will be deemed to be controlled by the e-commerce company.
That could disrupt the models of Amazon and Flipkart, whose wholesale units buy products in bulk and sell to thousands of vendors on their platform, who in turn sell to consumers.