Staying In The Game

Staying In The Game

The new controlled regimen has meant that e-commerce companies could lose nearly 35-40% of e-retail sales.

E-commerce giants Flipkart and Amazon are putting up a brave face despite the havoc the changes in the Foreign Direct Investment policy wreaked on them. The new controlled regimen, according to CRISIL estimates, has meant that e-commerce companies could lose nearly 35-40 per cent of e-retail sales, and revenues of around Rs 35,000-40,000 crore.

At the outset, Amazon appears at a disadvantage since it owns equity in Appario and Prione - its biggest sellers. Both firms are busy restructuring vendor sourcing, discounting strategy, and investments in step-down companies to ensure compliance.

Ambiguity in clarification PN2 (the policy change notification) has left several grey areas, especially about whether these firms are permitted to use capital instruments to own a part of seller companies. But with Reliance planning to enter the e-commerce arena, and billions of dollars already invested, backing out of the Indian market is not an option for either Amazon or Flipkart.