Prime Minister Narendra Modi along with Jeff Bezos, founder and CEO of Amazon
Ever since it set up shop in India, Amazon has been lobbying with the government to convince it that inventory-based format, where the platform owner directly sells to the customer, was the essence of its business model and that its investment would flow if that was permitted. According to a report in The Economic Times, Amazon founder and chief executive Jeff Bezos is said to have lobbied with Prime Minister Narendra Modi last week in Washington DC to allow hybrid ecommerce models (combination of inventory-led and marketplace).
Indeed, it is reasonable to expect any one-on-one between Bezos and Modi to touch upon the basic regulatory framework based on which the company operated in India, analysts said. Amazon’s desire to bring inventory-led business to India has been expressed time and again in a series of interviews since 2013.
Amazon, which recently committed an additional $3 billion investment into India, taking up the total to $5 billion, has a global mix of 60: 40 for inventory-based and marketplace business.
Industry observers equated Amazon’s wish to operate inventory-led business along with marketplace in its fastest-growing market with Walmart lobbying the government for FDI in multi-brand retail.
Currently, India permits 100% FDI in online marketplace but none in e-commerce (read inventory-led or pureplay online retail business). And while 51% FDI is allowed in multi-brand retail, NDA government is opposed to foreign investment in that sector, thereby sending out a message to the likes of Walmart to stick to wholesale operation alone.
Soon after the ecommerce major had set up its business in India in 2013, its India head Amit Agarwal had told Business Standard in an interview that the company followed a hybrid model (combination of inventory-based and marketplace) everywhere in the world except in Brazil. “In India, because of the regulations, we are offering only marketplace. If regulations allow, our sellers and buyers would both gain from the hybrid model,” Agarwal said.
In the US, Amazon reached the top through inventory-led model, a business it knows the best, according to industry experts.
In the initial months in India, Amazon executives had confirmed that the company was indeed engaged in talks with the government, seeking a nod to foreign direct investment (FDI) in e-commerce or inventory-based online retail.
A year later, in September 2014, the India head again said in an interaction that ‘’if there was a policy change and foreign investment was permitted in e-commerce, Amazon would have a combination of inventory-based and marketplace formats in India, like in the US.”
In fact, Amazon had delayed its entry into India, waiting for clarity in e-commerce rules. Finally, it entered India in June 2013 when it found domestic players like Flipkart and Snapdeal, both funded by foreign investors, operating online marketplace, where sellers are hosted on their platform. The host company does not transact directly with customers in a marketplace format, as opposed to inventory-led business.
India figured prominently in Bezos' annual address to shareholders recently. "India is another example of how we globalise an offering like marketplace through customer obsession and a passion for invention," Bezos had told shareholders.