Amazon’s JV seller Appario starts shipping inventory to new merchants; India working on Big Tech regulations

Also in the letter:
■ Indian venture funds prepare investments in B2B startups
■ Globalbees to sell foreign brands in India
■ Data Bill will be introduced in monsoon session: Govt tells SC

Amazon JV seller Appario starts shipping inventory to new merchants

Hi, I’m Pranav Balakrishnan in Bengaluru. If you have a bought smartphone, headphone or any other gadget from Amazon the chances are you got it from a seller called Appario. A joint venture between Amazon and the Patni Group, the partnership emerged as one of the biggest sellers on the ecommerce behemoth. But last year, Amazon said it is shutting down the seller amid scrutiny from the Indian government.

What’s driving the news? ET has learnt that Appario has started shipping inventory to some of the newer sellers that have emerged on Amazon after the shutdown of Cloudtail, a similar JV the tech major had. Appario’s inventory of goods across electronics and other top segments is being moved to sellers such as Dawntech, one of the largest on the Amazon India marketplace currently, as well as Clicktech Retail, sources told us.

Quote unquote: “The transition has begun, and our brands are being moved to sellers like Dawntech and Clicktech. Dawntech has become big on Amazon India,” said one of the people cited in the story.

Mini cloudtails: ET had reported in August last year that multiple new sellers- Dawntech, Clickteck, EZ Retail, Rocket Kommerce, VRP Telematics and Cocoblu Retail- had taken the place of Cloudtail. These sellers employ largely former executives of Cloudtail and are scaling fast. Dawntech reported operating revenue of Rs 977 crore in fiscal year 2022 compared to zero revenue in FY21, according to data from business intelligence platform Tofler. Multiple people aware of its growing contribution to total sales on the Amazon India marketplace said it is now among the top five sellers on the platform.

What’s next for Appario? Multiple sources added that Appario, once it ceases to exist as a seller, is likely to become a wholesale unit facilitating the sale of goods between a new set of large sellers on Amazon and smaller third-party sellers. This is being done so that brands can have a smooth relationship with the marketplace. Things have not panned out well for Amazon after shutting down Cloudtail and they do not want to face the same issues again.

India working on regulations to restrain Big Tech market dominance

The government is working on regulations to restrain Big Tech companies from misusing market dominance, in light of the competition watchdog’s recent rulings against Google, officials in the know told ET. The issue is being discussed among several ministries and a legal opinion in this regard has been sought, they said.

Details? The decision has been taken following learnings from the Competition Commission of India’s (CCI) rulings that Google had abused its dominance in Android Play Store market as well as the Play Store billing space.“There is a finding that they (Google) abused its dominant position. The CCI came to this conclusion and the NCLAT (National Company Law Appellate Tribunal) affirmed this finding,” a senior official at the Ministry of Electronics and Information Technology (MeitY) told ET. “The ministry is looking to ensure that this never repeats,” government sources said.

Tell me more: One of the provisions being considered is that if a Big Tech company exceeds a certain percentage of market share, it may be asked to follow additional regulatory compliance compared to other companies operating in that domain. “For example, a company like Google, which has 94% dominance in Play Store, can now face regulations which will force them to give equal space to apps of other competitors,” a second official said. Other provisions being mulled are to prevent continuous deep discounting by companies by advising a threshold or time limit for such marketing practices, officials said.

Background: The decision has been taken following learnings from the Competition Commission of India’s (CCI) rulings that Google had abused its dominance in Android Play Store market as well as the Play Store billing space.

Firstcry subsidiary Globalbees signs pact to sell overseas brands in India market

Globalbees, a subsidiary of SoftBank-backed etailer FirstCry, has snagged licences from foreign brands across the consumer durables and appliances segment, to sell them exclusively in India both online and offline, under a new line of business. The company has based itself on the Thrasio model which involves the acquisition and scaling of rapidly growing online brands.

What are the details: Globalbees has signed up with around 10 such brands, including Australia’s K Mart, South Korea’s Kuvings and Coway, and US and China-based Anker, among others, company’s CEO and cofounder Nitin Agarwal told ET in an interaction. Instant Brands, Ecovacs, Xgimi, Ecoflow and Tineco are among the other brands for which Globalbees has the India licence.

Omnichannel strategy: Globalbees, in addition to selling these brands online, is also expanding its reach with offline stores under the name “Frootal.” With exclusive licensing rights for India, Globalbees will offer a wide range of premium global products in traditional brick-and-mortar stores like Croma, as well as in other retail outlets operated by Globalbees.

Yes, but: The development comes amid a slowdown in the Thrasio model. Both globally and in India, roll-up platforms such as Mensa Brands, Goat Brand Labs, and others have scaled back on aggressive new acquisitions due to softening valuations and a tightening liquidity situation in the funding market.

B2B back in focus as Indian VCs rework playbook

Even as the slump in funding gets real, Indian venture capitalists are increasingly preparing their playbook to invest in business-to-business (B2B) startups as the segment gets lucrative owing to higher average order values (AOV), positive margin profile, ability to build strong profit pools and large market size. But there is more at play, as new-age founders from even non-B2B backgrounds attempt to start up in the space.

What’s driving the news: With the covid-pandemic, there has been shifting of supply chains away from China, as businesses look at diversity in their geographic risk. Further, unlike B2C, B2B businesses can get the ground running faster, at early stages, since they do not have to capture a sizable user base for network effects to kick in.

Big potential: As interest to back startups in this space grows, India is expected to add another 10-12 unicorns in the B2B segment over the next five years. Almost $12 billion more of equity capital is also expected to be poured into the space, show estimates from investment banker Avendus.

Focus on B2B gains: For Accel, an early backer of India’s B2B story, deal flow in the segment has multiplied almost three-times compared to pre-covid. At least four funds that ET spoke with said they have appointed specific teams to look at B2B investments in the country, as the deal pace picks up. Matrix Partners has continued its pace to back two to four B2B deals in a year and has already closed two deals in 2023, which are yet to be announced.

Challenges exist: However, the promise of profits ain’t enough as investors are looking at companies and sectors with favourable working capital cycles of 20-30 days. According to investors, B2B businesses have to build on their collection muscle, solve for working capital and not overexpose themselves to a limited set of customers, as they scale.

ET Ecommerce Index

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Indian startups move court to stop Google’s new in-app billing system

The Alliance of Digital India Foundation (ADIF), a group representing Indian startups such as MapmyIndia, Truly Madly, Paytm, Matrimony has filed a case in the Delhi High Court against the Competition Commission of India (CCI) and Google, alleging that the antitrust regulator’s “inaction” on the tech company’s user choice billing (UCB) system, is resulting in Google engaging in antitrust conduct, sources told ET.

What’s driving the news: In its petition, reviewed by ET, ADIF has alleged that CCI has “failed to take action on the multiple applications” made by the group. These included how Google is “taking actions which are in gross violation and intentional non-compliance” of the competition panel’s October order asking Google to cut back on some of its practices. News agency Reuters reported the development first on Tuesday.

Background: ET reported last week that ADIF had made a representation to the CCI in which it has urged the regulator to “look into these abusive dominance practices of Google on an urgent basis”. Under the new system proposed by Google, which will become effective from April 26, app developers need to pay a commission of 11-26% to the US-based tech giant.

ADIF’s plea: ADIF has sought the court’s intervention, and has urged that an interim order “prohibiting implementation of UCB” be issued. The new billing system will become effective from April 26. Delhi High Court will hear the case on Wednesday. It has alleged that the UCB is “cloaked as another version” of Google’s older billing system for in-app purchases, “which projects the hoax of giving liberty to app developers to opt for third party payment processors”.

Tweet of the day

Data Bill will be introduced in monsoon session: Govt tells SC

The government on Tuesday told the Supreme Court that the new Data Protection Bill was ready and would be introduced in Parliament during the monsoon session in July.

WhatsApp privacy policy challenged: The Supreme Court heard appeals challenging WhatsApp’s privacy policies, alleging violation of privacy free speech rights. Attorney General R Venkataramani requested a deferment of the hearing till August, citing that the Data Protection Bill was ready and would be “circulated” during the monsoon session.

Venkataramani argued that the consultation process for the Data Protection Bill is ongoing and the government is committed to ensuring that a comprehensive and effective law is enacted to address all the concerns raised in the petitions. Taking note of the AG’s submission, the bench asked the court registry to put the matter before the Chief Justice for constituting a new constitution bench, preferably in the first week of August. A new bench will be required since Justice Joseph is retiring in July.

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