Amazon India's wholesale business saw a steep 70 percent fall in revenue in the first full fiscal year since the FDI guidelines of Press Note 2 came into effect starting February of 2019.
Amazon Wholesale (India), which is in the business of wholesale trading, saw revenues of Rs 3,388 crore in FY20, a 70 percent fall from Rs 11,250 crore the year before, according to filings sourced from Tofler. The company's net loss fell marginally by 5 percent to Rs 133 crore year-on-year.
Amazon in its regulatory filing said: "(The) 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."
The Press Note 2, which was issued in December 2018, prohibits online marketplaces from ownership or control over the inventory of sellers. The rules do not allow ecommerce players to hold a stake in any seller on their marketplaces. Also, no vendor on a marketplace can acquire over 25 percent of its inventory from any of the group companies of the marketplace entity.
Industry members said that the ‘lower customer adoption’ could be due to several sellers being forced to cut their purchase from Amazon Wholesale in order to meet the regulations.
Last year, two of the biggest sellers on Amazon, Cloudtail and Appario also had to restructure their shareholding due to the equity stake by Amazon and the rules that forbid any ownership of any vendors that sell on the group company’s marketplace.
However, FLipkart’s wholesale arm did not see a similar drop in revenues, and in fact saw revenues rise 12 percent in FY20.
Flipkart's wholesale arm Flipkart India saw revenues for FY20 jump 12 percent year on year to Rs 34,610 crore, while losses decreased by 18 percent to Rs 3,150 crore during the same fiscal, according to regulatory filings sourced from Tofler.
Flipkart has been aggressively pushing its wholesale business, and earlier this year Flipkart also acquired the business of Walmart India, which operates 28 B2B Modern Wholesale Stores under the brand name of `Best Price’.
Flipkart also launched Flipkart Wholesale, a B2B online marketplace post the acquisition.
First Published: IST