/Amazon Wholesale’s revenue slumps 70% due to change in India’s FDI rules

Amazon Wholesale’s revenue slumps 70% due to change in India’s FDI rules

Bengaluru: Revenue of Amazon India’s wholesale unit fell 70% to Rs 3,387 crore in the fiscal ended March 31, 2020, due to a change in government regulations that came into effect in February 2019, just prior to the fiscal year starting April 1.

Losses at Amazon Wholesale declined 5% to Rs 133 crore, regulatory documents sourced from business intelligence platform Tofler showed.

The decline in revenue could be attributed to a change in India’s foreign direct investment (FDI) rules which disallowed sellers on e-commerce marketplaces from purchasing more than 25% of their goods (in value terms) from entities related to the marketplace.

Amazon had said in April 2019 that it had made structural changes to remain compliant with the government’s Press Note 2 regulations and had suffered some downtime, but chief financial officer Brian Olsavsky had assured investors that the effect of the changes in the quarter were “minimal”.

“Drop in revenue is due to new government regulation resulting in lower customer adoption. Management is in process of expanding its business and management and is confident of its future growth,” Amazon Wholesale said in the regulatory filings.

The government had also barred group companies of marketplaces from selling on the marketplace, which led to Amazon divesting stake in the parent companies of its two largest sellers – Cloudtail and Appario.

An Amazon India spokesperson did not respond to ET’s queries till press time Thursday.

Meanwhile, its marketplace unit – Amazon Seller Services – reported a 43% growth in revenue to Rs 11,028 crore in the year, while losses widened by 3% to Rs 5,849 crore.

Amazon Seller Services said it would invest in opening new fulfilment centres and also in technology advancement, apart from launching new products and services for customers and sellers.

“The Company is confident on its future growth,” it said in the filings.

Amazon Seller Services operates the company’s front-end marketplace, which connects customers to sellers listed on its platform. The company charges a commission on every sale, apart from offering other services such as logistics, warehousing and marketing to its sellers to earn revenues.

The marketplace unit had increased revenue by a little over 50% in financial year 2019, but losses had also widened by 9.5% from the year-ago period.

Amazon has pumped in Rs 5,643 crore ($ 770 million) in three tranches into Amazon Seller Services this year.

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Tech-Economic Times