Amazon’s products are returning to its Indian website after the company scrambled to restructure its companies to comply with new ecommerce regulations that took effect last week.
Numerous items listed by the key Amazon seller Cloudtail, from tool boxes to televisions, were available for the first time on Thursday since the new rules came into effect on February 1, disrupting the operations of Amazon and Walmart-owned Flipkart, the two biggest players in India’s growing ecommerce sector.
Amazon cut its stake in Prione Business Services, Cloudtail’s parent company, to 24 per cent on Wednesday, meeting regulations preventing ecommerce companies from owning 25 per cent of the sellers using their platform.
Catamaran Ventures, the family office of NR Narayana Murthy, one of the founders of Indian tech company Infosys, raised its stake in Prione Business Services to 76 per cent.
“Catamaran has effected the required changes to be 100 per cent compliant,” said Abishek Laxminarayan, chief executive officer at Catamaran Advisors, in a statement. “We regret the inconvenience caused to our suppliers and customers due to the stoppage of the operations of Cloudtail India.”
The move is the latest in a series of creative solutions adopted by the US companies to conform to India’s increasingly complex ecommerce rules, which Morgan Stanley recently warned could even force companies out.
“It is still too early to say how the ecommerce landscape in India may change. But, as Amazon did in China, it may make sense to potentially walk away if Walmart can’t see a long-term path for profits,” said Morgan Stanley analysts in a note earlier this week.
In the final months before the polls, the rules are designed to appease India’s powerful traders, an influential voting bloc being courted by the Prime Minister Narendra Modi.
Vivek Paliwal, CEO of ecommerce service 99 Yrs, said the rules have “created a stir” in the retail sector. Indian brands have lost faith in the US tech giants after they couldn’t sell items for almost a week. “How this gets regulated and how government reacts on it is a question mark. There is confusion,” said Mr Paliwal, “not everyone will come back with confidence.”
The new rules also prohibit Amazon, and other foreign-owned marketplaces, from being the destination of more than 25 per cent of the sales of any seller. Analysts predict the government will continue putting pressure on Amazon and Flipkart until India’s fiercely fought elections have been decided later this year.
“It’s a very sensitive topic, they are taking a lot of market share,” said Abneesh Roy, research analyst at Edelweiss Securities, about Amazon and Flipkart. “I don’t expect a lot of reprieve from the government. After elections, we will see.”
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