In an interview with the Economic Times, Amazon India MD Amit Agarwal largely avoids talking about the recently announced policy on FDI in ecommerce, which mostly affirms the status quo of not allowing FDI in business-to-consumer (B2C) Ecommerce for multi-brand retail, and places additional restrictions in terms of restricting discounting. A copy of the policy here. In the interview, Agarwal doesn’t go into detail about his company’s point of view, and only says:
We have said that if the government opens up FDI in inventory-based ecommerce, then Amazon would have to earn its spot as a seller on the platform, which we do in other markets. I genuinely believe it(inventory-based ecommerce) is good as it would allow Amazon to source products from manufacturers that sellers are unable to because they have constrained working capital. Despite that, we have a pretty good model.
It’s been a little over two years since the DIPP help a consultation on FDI in Ecommerce, which led to the creation of the final policy. In fact, a meeting was held at the DIPP on March 15th 2014, just a day before the current government came into power.
Here’s what Amazon actually wanted from the policy based on its filing with the Indian government:
1. Yes to FDI in Ecommerce, but only 51% under automatic route: Amazon recommended (expectedly) 100% FDI in inventory led B2C ecommerce, although it suggested that anything at 51% (or below) should be allowed under the automatic route. This means that it suggested that 100% should come under the Foreign Investment Promotion Board (FIPB) oversight.
Amazon argued that FDI in B2C Ecommerce would create opportunity for smaller and mid-sized manufacturers to scale, which they can’t do via physical retailers; encourage infrastructure development (warehousing, logistics); enhance transparency in financial transactions and enable better tax collection, among other things.
2. Not yet for perishable products: FDI in B2C Ecommerce “could” be restricted to non-perishable products
3. Wanted minimum capitalization requirements to allow FDI in Ecommerce: “Minimum capitalization requirements to boost infrastructure and employment will be beneficial to the country.”
4. Limits to local sourcing: Amazon was not specific, didn’t oppose local sourcing requirements. “The value of an expanded online retail eco-system is to enable increased sourcing from local enterprises to offer Indian consumers a large array of local goods and content. This is core to a robust and mature local online ecosystem.”…”Amazon would recommend practical limits of domestic sourcing for the industry. Sourcing for goods should be required from all domestic enterprises and not restricted by just size. The mandate should be applied to the total quantity of goods sourced.”
5. Looked at B2C ecommerce from a digital content perspective too: Amazon pointed out that B2C ecommerce “Enables several independent authors and content producers to publish and promote their original work inexpensively and reach large customer sets,” and sourcing restrictions “will be difficult to apply” to digital content.”
Importantly, it suggested that “B2C E-commerce should encompass all three; Goods, Services and Intellectual Property. There cannot be any specific distinction between products and services as with growing technological advancements several products or goods are available in digital formats and not in the traditional physical format.”
6. Dealing with India’s restrictions on FDI in offline multi-brand retail (MBRT): Amazon suggested that online inventory-led ecommerce stores with FDI may be prevented from setting up physical storefronts in states that don’t support FDI in offline multi-brand retail. And, “Any additional restriction based on location to deliver to the consumer will goes against the very tenets of E-commerce which is meant to provide scale to manufacturers and to provide inclusive access to consumers nationally. The very nature of E-commerce is to transcend physical boundaries and provide affordable avenues for scale and access to both suppliers and consumers.”
Note that this filing is from 2014, so Amazon’s views might have changed since.
MediaNama also participated in this consultation. A copy of our filing here. In a nutshell, while we agreed with Amazon on allowing FDI in inventory led multi-brand retail, we disagreed on the specifics of what should be allowed.