Amazon evaluating changes in FDI rules to avoid unintended fallout

Amazon, which has committed over $5 billion investment in India, said it has built its business around price selection and convenience. “...there is much uncertainty as to what the impact of the government rule change is going to have on the e-commerce sector there. We remain committed to complying with all laws and regulations, we will, but we’re evaluating the situation,” Amazon CFO Brian Olsavsky said in a recent investor call.

The new rules, which came into effect from February 1, bar online marketplaces that have foreign investments from offering products of sellers in which they hold a stake and ban exclusive marketing arrangements.

Another clause states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 percent of the vendor’s purchases are from the marketplace entity, including the latter’s wholesale unit. Products from sellers like Cloudtail and Appario - that have equity investment from Amazon - have been taken off from Amazon.in’s platform.

Amazon’s net sales during the fourth quarter rose 20 pc to $72.4 billion. Net sales from international operations were at $20.8 billion in the quarter ended December 2018. For the Q1 of 2019, Amazon expects its net sales to be in the range of $56-60 billion, translating into a growth of 10-18 pc compared to the January-March 2018 quarter.