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Major e-commerce players may have to revisit their strategy

Experts feel it is essential for Amazon to comply with local business requirements


It is expected that major e-commerce players may have to revisit their strategy and encourage smaller players. This is largely seen by experts and market analysts in the wake of two recent developments. First, the announcement of E-commerce giant Amazon and Infosys co-founder N.R. Narayana Murthy’s Catamaran Ventures about mutually deciding to discontinue their joint venture (JV) beyond the end of its current term that is ending in May 2022, and the latter about Supreme Court refusing to intervene in an anti-trust investigation ordered by the Competition Commission of India (CCI) against Flipkart and Amazon.

Undoubtedly, over the last decade since its inception in India, e-commerce has attempted a significant change in its business model moving from a marketplace to inventory-driven business which provides an increased margin and greater control in order fulfilment. While the initial thought was more of empowering sellers and enlarging their reach to consumers, e-commerce players have discovered better ways of business through inventory models over the last decade. Though on the face of it this appears to defeat the very purpose for which it was created, consumers have veered towards product availability, quick fulfilment and lower price warranting the moot question from CCI of any unfair trade practices by the players involved.

“The Supreme Court's rejection of the request to stay the CCI inquiry is the right direction to prevent any issues or streamline processes through discovery by CCI. Ending a partnership with Catamaran on an inventory model does raise questions but the market size in India may not allow any strangulation of business models of sellers and will pave the way for new players in such an event. In India, consumers will remain the king and market forces will recognise this fact as they scale,” said Subramanyam Sreenivasaiah, CEO at Ascent HR.

Prione Business Services Pvt. Ltd, the JV between Amazon and Catamaran, has been running successfully for the past seven years and is up for renewal on May 19, 2022. The JV has enabled over 300,000 sellers and entrepreneurs to go online and enabled 4 million merchants with digital payment capabilities, providing these SMBs and merchants access to millions of customers across the country.

A joint statement by Amazon India and Catamaran stated that the JV has made tremendous strides in this direction, leveraging Catamaran’s India insights and Amazon’s technology expertise. “With feet-on-street teams in 30 cities across India, the JV enabled hundreds of thousands of sellers to sell online and provide a wide selection of products for Indian customers. The JV also supported the growth of programs like Karigar and Saheli. Prione has played an important role in transforming Indian e-commerce, and paving the way for the global scale up of emerging Indian brands,” as per the statement.

“The decision to end the JV will firstly end the dependency on one specific entity, secondly, pave the way for other smaller players to fill in the shoes and thirdly, bring in the real competition in the market encouraging smaller domestic players to take maximum advantage of the situation. Big e-commerce players will have to revisit their strategy of procurement and sourcing, encourage smaller players to bring in much need parity and also showcase how absence of big players with bigger inventory is not going to impact them or their operations,” Neeraj Dubey, Partner – Corporate Law, Singh and Associates, told THE WEEK.

He further added that the FDI in inventory-based e-commerce is banned to protect the interest of small merchants. However, there were several complaints raised by the retail associations on the big e-commerce players controlling the sellers or their inventory, thereby harming healthy competition in the market. “The CCI probe will help in clarifying these allegations,” added Dubey.

Experts feel that Amazon's strategy in India are on fine footing and the e-commerce major may be trying to fit in their strategy as per the requirements of the Indian ecosystem. “The fundamentals of Amazon's business are on fine footings, so, essentially, the issue that emanates from SC judgment calls for change in the governance framework. There are many legally permissible, creative ways for Amazon to derive similar outcomes, if not the same outcomes, and still remaining within the bounds circumscribed by the SC judgment,” said Alok Shende of Mumbai-based Ascentius Consulting.

Market and branding experts feel that it is essential on part of Amazon to comply with the local business requirements and that will surely help the giant in expanding in the Indian market. “Amazon restructures to fit itself into the ambit of local business rules and regulations. That is a good thing to do. Amazon understands clearly that it needs to weave itself into the local fabric of business rules. It cannot be one unyielding fabric for every country. I do believe Amazon will grow bigger and better with all this,” said brand expert Harish Bijoor.

Meanwhile, the Confederation of All India Traders (CAIT) has stated that the discontinuation of the JV between Amazon and Catamaran is the result of sincere and well-thought efforts of the Union Government to bring radical reforms in e-commerce business of India to make it a transparent, unbiased and neutral business stream in India.

“Cloudtail, an arm of Catamaran being a seller on Amazon, cannot escape from the ambit of investigation at a time when the CCI will soon conduct investigation of Amazon and Flipkart. Cloudtail as a seller on e-commerce platform of Amazon is a classic example of how Amazon, Flipkart and other companies are diverting the orders received by them to their preferential sellers. It is a known fact that orders generated on these e-commerce portals reach directly to Amazon and Flipkart instead of a seller whose products have been purchased and marketplaces like Amazon and Flipkart decide as to whom the orders are routed for delivery. These companies route the order through their preferential sellers like Cloudtail,” said Praveen Khandelwal, Secretary General of CAIT.

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