Amazon Wholesale faces huge decline due to change in India’s FDI regulations.
Amazon India’s wholesale branch which is the business-to-business (b2b) arm of the American e-commerce company, saw a decline of 70% in its revenue at Rs. 33,880 million ($460.51 million) in the fiscal year 2020, ending March 31. According to regulatory data recorded on data platform Tofler, it made a revenue of Rs. 112,500 million ($1529.14 million) the previous year. Amazon Wholesale buys products in bulk from various manufacturers and then sells it to platform sellers who sell on their marketplace.
The company imputed its loss to a change in India’s foreign direct investment (FDI) regulations which restricts online sellers from purchasing more than 25% of their goods from entities within the marketplace. It is Press Note 2, which was implemented by the government in order to equal the chances between the online and offline retailers. This norm, implemented in February 2019, limits online e-commerce retailers to use their almost endless flow of foreign capital to cover group companies and pay for high discounts.
Amazon Wholesale said during regulatory filing: “Drop in revenue is due to new government regulations which lowered customer adoption. Management is in process of expanding its business and it is confident of its future growth.”
In April 2019, Amazon had claimed to make structural changes to adapt to the government’s Press Note 2 regulations and felt some downtime, but Chief Financial Officer Brian Olsavsky had promised the investors that the effect was minimal.