Over a dozen small sellers have exited or suspended their accounts on Amazon since they were unable to manage deliveries and logistics on their own, after the new FDI in e-commerce policy came into effect on February 1, reports the Economic Times.

MediaNama has reached out to Amazon, CAIT and Swadeshi Jagran Manch, and will update this when we hear from them.

The new regulations disallow entities owned by e-commerce players to sell on the platform, in order to ensure a level playing field between all sellers/retailers. This has led to Amazon-owned Cloudtail and Appario suspending their operations. In the past few days, Amazon’s Echo speakers disappeared from the platform, then appeared again, Amazon Basics products disappeared, and Amazon Pantry emptied out (but was live in under a week).

Most orders for smaller sellers were fulfilled by these entities, but they’ve not received any direction or guidelines from Amazon about what would happen now, per the report. Both Cloudtail and Appario still sell via Amazon Business, but smaller retailers banked on them for back-end support, order processing, returns, etc.

Dumping stake in own brands

  • According to ET, Amazon may convert Cloudtail and Appario into wholesale entities carrying out B2B transactions to align itself with the new FDI in e-commerce regulations.
  • Both will then sell to third-party vendors who will then sell to consumers.
  • Amazon is reportedly in the process of identifying preferred sellers.
  • However, another Amazon executive told ET that the company had not given up the idea of offloading its stakes in both sellers, a step that would make them compliant.

WS Retail, once the largest seller on Flipkart, stopped selling on the platform reportedly over 6 months ago to comply with the government’s directive that marketplaces do not source more than 25% of their goods from a single entity.

Walmart’s conundrum

Yesterday, investment bank Morgan Stanley said that Walmart may exit its Flipkart acquisition, as the compliance burden from Indian laws increases. The bank said that “an exit is likely not completely out of the question with the Indian e-commerce market becoming more complicated,” estimating 20-25% increase in Flipkart’s losses owing to the new FDI in e-commerce regulation.

However, Flipkart refuted the bank’s claim – CEO Kalyan Krishnamurthy stated that this “couldn’t be further from the truth” and that “Walmart remains extremely confident” about the Indian market and about Flipkart’s ability to lead the e-commerce space in India.

Myntra claims to be new FDI policy compliant

Flipkart-owned Myntra told ET that it does not own equity in the sellers on its platform, and that it is compliant with the new regulations. According to ET, Myntra has onboarded new sellers to manage sales on private labels of brands it has strategic partnerships with. Myntra holds a stake in both the AKS and Chemistry brands as part of an accelerator program it launched in 2017, offering brand back-end support. It also owns stakes in several private labels, including by Deepika Padukone and Saif Ali Khan.

Read more: Amazon Users in India Will Get Less Choice and Pay More Under New Selling Rules