Following New FDI Rules, Amazon Plays Up Homegrown Private Labels In India

At a time when the FDI guidelines in ecommerce are making it difficult for the etailers to develop their business in India, Amazon has been exploring ways to expand its reach and stay ahead of the game.

According to reports, Amazon’s home cleaning private label brand Presto has been selling products in categories such as Harpic, Lizol and Pril at deep discounts.

Amazon had made no official announcement about the launch of the private label brand in India. However, the products such as floor disinfectants, paper napkins to dishwashing gel have been up for sale since October 2018. The brand is also present in the US and some other international markets.

The company has also reportedly recruited some local contract manufacturers for producing the goods for Presto. These products are being marketed and sold by Amazon’s popular online seller Cloudtail.

The initiatives to expand its footprint in FMCG category comes in at a time when the ecommerce companies are being scrutinised over not ensuring a level playing field.

The new FDI guidelines which came into effect from February 1, 2019, is aimed at promoting the domestic players and hence prohibits the etailers to provide deep discounts. The rule also added that no ecommerce marketplaces will be allowed to mandate a seller to sell products exclusively on its platform.

The new rules also prohibit marketplaces from making more than 25% of purchases of a vendor. In order to comply with these rulings, Amazon Asia has reduced its stake in Cloudtail to 24% from the earlier 49%.

However, in order to maintain its position in the Indian ecommerce market, Amazon has been taking several initiatives to comply with the law as well as expand its dominance over the market.

Last week, it was reported that Amazon reduced its commission charges to attract more independent sellers and show itself as a friendly marketplace. The commissions have been lowered by 35% for famous fashion sellers and by over 50% on specific FMCG categories.

Also, both Amazon and Flipkart are reportedly in talks with Mumbai-based online kids fashion platform Hopscotch for purchasing a minority stake.

Meanwhile, the company has suspended its plans to acquire stake in Kishore Biyani’s Future Group and is also reconsidering its deal to buy stake in Aditya Birla’s More chain of grocery supermarkets.

Following the implementation of the FDI guidelines, the company experienced a fall in its shares by 5.38%  in the start of the month losing $45.22 Bn in market capitalisation.

[The development was reported by ET]