ASIA – Amazon and Walmart-owned Flipkart have appealed to the Indian government seeking more time to comply with the new Foreign Direct Investment (FDI) policy for ecommerce.
The firms have requested an extension by up to six months to comply with the new regulation announced by the government in December last year that requires a change in business models in the ecommerce industry.
We are working diligently to assess all aspects of the Flipkart business in an effort to ensure full compliance with the new rules.COMPANY SPOKESPERSON
We believe an extension is appropriate in order to ensure that all elements of the new Press Note are clarified and a smooth transition for marketplace participants occurs without any disruption for customers and small sellers.
The new FDI regulations were introduced following longstanding complaints by local brick-and-mortar traders and retailers claiming that overseas-owned online marketplaces were violating the existing policy.
Flipkart believes that a more collaborative approach will go a long way in promoting a fair pro-growth policy that will see the retail sector which has a stake in India’s competitive economy.
According to the local retailers, the bigwigs are greatly influencing the prices of products by offering deep discounts and indirectly employing an inventory-based model.
An Amazon India spokesperson said that the company is evaluating the circular and has no further comment to make.
Amazon highlighted the importance of involving all stakeholders in the sector while bringing bring about the necessary changes in order to comply with the changes.
The new FDI regulations
According to the press note issued by Department of Industrial Policy and Promotion (DIPP) on December 26, the updated policy clearly bars any entity related to the marketplace or any group entity from selling directly to the consumer.
In the new FDI policy vendors should not have equity participation by the marketplace or its group companies.
Additionally, the inventory of a vendor will be deemed to be controlled by the marketplace if more than 25% of the vendor’s purchases are from the marketplace entity, including its wholesale unit.
The marketplace entity or its group companies cannot have control over inventory under the FDI rules.
Amazon and Flipkart purchase goods in bulk at cheap rates from manufacturers sell them to companies or preferred sellers – which are entities in which the ecommerce company may have an equity stake.