Amazon root for inventory ecommerce model; Flipkart, Snapdeal strongly oppose

Soon after the Indian government announced 100% FDI in ecommerce and altered the policies governing online marketplaces, Amazon reached out to officials to get some clarity over the rules and regulations.

In a meeting held last month, the American etailer has again conveyed to the officials that marketplaces should be allowed to follow a hybrid ecommerce model – mix of inventory-based and marketplace. Amazon’s pitch is that letting inventory model to flourish will also support Indian government’s ‘Make in India’ initiative.

Amit Agarwal, Vice President and Country Manager at Amazon India asserted,

“If we are really serious about Make In India, then a hybrid model allows Amazon to bring in and buy products from these disadvantaged small and medium manufacturers like we do globally.”

One would think that other ecommerce players too would support Amazon India’s appeal. Turns out, they do not. Flipkart and Snapdeal don’t support the idea of a hybrid ecommerce model.

Why?

To safeguard the interest of India’s small and medium sellers, Flipkart and Snapdeal claim.

“..unfettered access to cheap imports, through the inventory route, will deny local manufacturers the opportunity to benefit from India’s huge domestic market and will work against the success of key initiatives, like Make in India, which seek to boost local manufacturing. An inventory-based model of ecommerce would be disastrous for such new enterprises,” said Snapdeal’s spokesperson.

The homegrown etailers believe that SMEs’ business will be seriously affected, if ecommerce firms are allowed to operate on an inventory-based setup.

Emphasizing that the online marketplace model should remain the way it is, Flipkart’s spokesperson stated,

“The current policy that’s in place is well thought-out and suits a developing economy like India. It also provides ample growth opportunities for emerging businesses and benefits thousands of small manufacturers and sellers across the country.”

Flipkart and Snapdeal – Who are they kidding?

Seriously, who are they are kidding? Flipkart, Amazon and now Snapdeal either have their own sellers and/or hold inventory. Flipkart, in fact reduced WS Retail (its in-house vendor) sales by setting up multiple seller entities to accommodate modified FDI policies (25% cap on sales from one seller). Flipkart owned Myntra and Jabong too have its own sellers, Vector Ecommerce and Jade eServices, respectively. And Snapdeal recently formed a wholesale unit to source products.

Then why both the etailers are opposing Amazon’s recommendation when they already follow an inventory-based model? Is making it official an issue? Is accountability an issue? Is being answerable to the government an issue?

And what do sellers think?

While speaking to Indian Online Seller, seller’s lobby group All India Online Vendors Association’s (AIOVA), spokesperson says,

“We do not mind them to do inventory model to build new unexplored categories. However, for existing categories and products they should maintain a balanced ecosystem of a marketplace.”

He adds,

“We can easily scale our brands and products to a new level provided a marketplace would give us same visibility that they provide to their own labels. Marketplaces should decide whether they are tech companies, retailers, advertising company or marketplace. If balance is not maintained then sellers eventually leave marketplace and that would lead to loss on the assets dedicated to maintain the marketplace. ”