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Amazon launches seller lending platform, says dearth of working capital cripples businesses

Amazon launches seller lending platform, says dearth of working capital cripples businesses

Amazon launches seller lending platform, says dearth of working capital cripples businesses
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By Rukmini Rao  Jun 14, 2018 6:30:31 AM IST (Updated)

After Amazon India launched its seller lending network in India on Wednesday, the ecommerce company said that lack of working capital is one of the primary reasons why businesses fail, whether it is offline or online.

After Amazon India launched its seller lending network in India on Wednesday, the ecommerce company said that lack of working capital is one of the primary reasons why businesses fail, whether it is offline or online.

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Speaking to CNBC-TV18, Gopal Pillai, general manager and director seller services, said lenders will be giving the loans based on sales history of sellers.
Pillai said Amazon will not be charging sellers for providing this service as they are facilitating it.
Amazon will have six lenders in this programme - Aditya Birla, Yes Bank, Bank of Baroda, Capital First, Capital Float and Flexi Loans.
Edited Excerpts:
You went on to announce the Amazon sellers programme some time back and the new initiatives under this. If you can explain to us what really this means for the sellers of Amazon?
Today, we are announcing seller lending network. Multiple lenders will be able to offer loan to a particular seller and seller can choose based on the terms, which lender they want to go with and get their loan disbursed. With this new programme, the entire process on an average can be done within two to three days, without stepping out of their office. We are doing the hard work of getting the best in class interest deals for them and sellers can avail them in real time.
In terms of partnership who are the folks that you have already worked out this programme with?
We have around six lenders in the network now, Aditya Birla, Yes Bank, Bank of Baroda, Capital First, Capital Float and Flexi Loans.
What is in it for Amazon? Is it a business kind of a thing that you are looking at or a pure convenience for the sellers on the platform?
It is all. Whether it is offline or online, lack of working capital is one of the primary reasons why businesses fail or they are not able to get their inventory or buy the inventory. So, what we are saying is, let us continue to make the sellers focus on their core competency, which is manufacturing of product or buying and selling of product, we will take care of the rest – whether it is fulfillment channel or operations or imaging, cataloguing anything. We are trying to help them throughout their life cycle and we are saying working capital need is part of their life cycle and that is one of the integral components of whether they can be successful or not.
We are saying you don’t have to go, talk to ten different banks and shop around to find what the interest rates you get. Here, you don’t even need to give any collateral or asset. Based on your sales history, we are able to give loans working with our banking partners, they are able to give loans with no additional assets. So, it can vary any between Rs 2 lakh to Rs 5 crore and the interest rates range from 11 to 15%. So, this is unheard of rates from the industry for loans with no collateral.
Will Amazon be charging their sellers for providing these services?
No, absolutely not. These are provided by the lending partners to the sellers directly, we are just facilitating it.
In terms of the sellers that you have currently onboard, since you have just finished the financial year as well, what has been the growth? If you can also give some sense on that front?
We just finished five years in India. In June 2013, we started with 100 sellers and today we have more than 3,40,000 sellers on amazon.in as well as they are selling more than 170 million products to the customers in India.
Have sellers already shown interest? You had pilot of this programme going on as well. So, what has been the initial feedback and how many of your sellers would perhaps be eligible to kind of be on this programme?
We use the criteria or the business rules provided by the lending partners. To say, based on what profile the lending partners want to give, then we select and send an invite only to sellers to say that we are offering this programme, do you want to take it. They can go through the whole process on seller central, look at the loans and get it applied. The whole disbursement of the flow happens immediately, average it takes two-three days. 30% of the loans get covered within a day.
Is there any kind of arrangement where perhaps banks would directly be recovering from the sales of Amazon or is there any other such intervention mechanism that have been put in place?
Lenders are our customers too and that is one of their primary concerns when they are giving a loan, they want to make sure that their loans get repaid which is understandable. So, what we said was, when the sales happens from the sellers, sellers will say this percentage of the amount will go back directly to repayment, so that the banks get the convenient repayment directly coming from the sales proceeds from Amazon for that particular seller.
The number of sellers who are willing to opt for it or are you scheduling the inclusion of sellers in a particular way or do you have the bandwidth to have at least 50 or 60% of your sellers on to this programme, how does it look like?
Of the sellers, we have given invite and say we are offering a loan, more than 60% of the sellers accept our loan, get it approved and the money gets disbursed to accounts. Of the sellers, who take the loan, we see that, that similar amount of incremental business happening on Amazon. What does it mean? They are using the loan amount for the right business reasons, they are not using it for personal purposes. Secondly, they are investing back on Amazon by procuring the products for the loan amount they got.
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