Flipkart, Amazon will have to downsize WS Retail, Cloudtail
government's latest directive on e-commerce will force Flipkart and Amazon to reduce the dominance of certain sellers on their platforms. The directive says no vendor or their group companies can account for more than 25% of the overall sales on a platform.
WS Retail on Flipkart's platform and Cloudtail on Amazon's platform account for substantial shares of the sales on these platforms. The exact shares have not been publicly disclosed, but both are believed to have shares of well over 25%.
WS Retail's turnover tripled to over Rs 10,000 crore in 2014-15, compared to the year before. WS Retail sells a range of products, from shoes to home appliances and electronics. Cloudtail India, a company backed by NR Narayana Murthy'sCatamaran Ventures, has become the largest seller on Amazon India's platform and some media reports have said it contributes to nearly 40% of sales on the platform.
Vivek K Chandy, partner in law firm J Sagar Associates, said the new guidelines could affect marketplace e-commerce entities that have only a few vendors.
Vivek Gupta, partner in BMR Advisors, said, "While permitting 100% FDI in marketplace models, the government wants to ensure that marketplaces do not start acting like retailers. And hence, the policy contains safeguards, limiting their role to being facilitators rather than actual sellers — these restrictions include casting no influence on pricing, playing no role as regards warranty and limiting dominant position for a single seller on the platform."
IT industry body Nasscom said restricting sales of a vendor to only 25% of the sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items. "The industry might face difficulties in case of sale of electronic items, where a vendor maybe offering exclusive access to certain items or discounts," it said.
WS Retail on Flipkart's platform and Cloudtail on Amazon's platform account for substantial shares of the sales on these platforms. The exact shares have not been publicly disclosed, but both are believed to have shares of well over 25%.
WS Retail's turnover tripled to over Rs 10,000 crore in 2014-15, compared to the year before. WS Retail sells a range of products, from shoes to home appliances and electronics. Cloudtail India, a company backed by NR Narayana Murthy'sCatamaran Ventures, has become the largest seller on Amazon India's platform and some media reports have said it contributes to nearly 40% of sales on the platform.
Vivek K Chandy, partner in law firm J Sagar Associates, said the new guidelines could affect marketplace e-commerce entities that have only a few vendors.
Vivek Gupta, partner in BMR Advisors, said, "While permitting 100% FDI in marketplace models, the government wants to ensure that marketplaces do not start acting like retailers. And hence, the policy contains safeguards, limiting their role to being facilitators rather than actual sellers — these restrictions include casting no influence on pricing, playing no role as regards warranty and limiting dominant position for a single seller on the platform."
IT industry body Nasscom said restricting sales of a vendor to only 25% of the sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items. "The industry might face difficulties in case of sale of electronic items, where a vendor maybe offering exclusive access to certain items or discounts," it said.
