Starbucks will anchor the new $400 million food-focused Valor Siren Ventures fund

Starbucks is serving up a steaming hot $100 million cash commitment to anchor a new food-focused fund in partnership with the consumer and tech-focused focused private equity firm Valor Equity Partners.

The behemoth of burnt-coffee said that its commitment to the Valor Siren Ventures fund is an attempt to focus on “new ideas and technologies that are relevant to customers, inspiring to partners (employees), and meaningful to Starbucks business.”

The Starbucks announcement was short on details, except for a general statement that it would focus on investments in companies developing technologies, products and solutions related to food or retail.

As a company, Starbucks has been incredibly innovative — rolling out new tech-enabled services to customers. The company has one of the most popular mobile payment services, is dabbling with cryptocurrency payments, and has a robust on-demand delivery service through UberEats.

Meanwhile, Valor has a long history of investing in both technology and consumer food businesses. Thee firm as investments in companies that run the gamut from SpaceX, Tesla, and Addepar to food services companies and restaurant chains like WowBao, Fooda, and Eatsa.

With its commitment Starbucks joins a growing number of food and beverage companies that are embracing venture capital. Kelloggs, Tyson Foods, General Mills all have affiliated venture funds and even Chipotle is starting an accelerator program.

“We believe that innovative ideas are fuel for the future, and we continue to build on this heritage inside our company across beverage, experiential retail, and our digital flywheel,” said Kevin Johnson, president and chief executive officer of Starbucks, in a statement. “At the same time, and with an eye toward accelerating our innovation agenda, we are inspired by, and want to support the creative, entrepreneurial businesses of tomorrow with whom we may explore commercial relationships down the road. This new partnership with Valor presents exciting opportunities, not only for these startups, but also for Starbucks, as we build an enduring company for decades to come.”

Xiaomi Q4 sees strong growth in overseas shipment and internet services

Xiaomi, the Chinese company known for its cheap handsets and a vision to drive revenues by selling internet services, has come in ahead of analysts’ estimates in its fourth-quarter profit although revenues missed expectations.

The Hong Kong-listed company more than tripled its net profit to 1.85 billion yuan ($276 million), exceeding the 1.7 billion yuan average estimate, Reuters reported citing Refinitiv data. However, revenue from the quarter missed the 47.4 billion yuan expectation, rising 26.5 percent to 44.4 billion yuan ($6.62 billion).

Xiaomi singled out overseas markets in its latest earnings report as the segment grew 118.1 percent to make up 40 percent of its total revenue in the fourth quarter, compared with just 28 percent for the year-earlier period. Xiaomi has been particularly well-received in India, where it holds a leading position in smartphone shipments according to market researcher Canalys, and it’s seeing rapid growth in western Europe.

Unlike conventional smartphone makers that are fixated on selling hardware, Xiaomi runs what it calls a “triathlon” business model comprising of hardware, software and retail. To put it in layman’s terms, the company is selling hardware through its network of online and offline stores, upon which users will consume the app services and in-app ads that come with its smartphones, smartwatches, smart air purifiers and hundreds of other connected devices.

Xiaomi has repeatedly billed itself as an “internet” firm, though so far smartphones are still its main economic driver, accounting for 65.1 percent of overall revenue in Q4. Despite a sluggish year for smartphone brands around the world, Xiaomi handsets grew nearly 30 percent to 118.7 million units in sales last year. The company predicted back in October that it was on course to hit the 100 million sales mark that month.

25.1 percent of Xiaomi’s Q4 revenue went to smart devices (excluding phones) and lifestyle items, representing an 87 percent year-over-year growth. The latter category, which ranges from umbrellas and suitcases to clothes and shoes, is pivotal to Xiaomi’s goal to attract more female users, an effort that has seen the company team up with selfie app maker Meitu. 

Internet services remain as Xiaomi’s smallest segment, bringing in only 9.1 percent of total revenue and growing at 61 percent year-over-year. But the highly lucrative business is bound to carry more load in the future as Xiaomi has promised to keep profit margins for smartphones and hardware under 5 percent.

Gross profit margin from Xiaomi’s internet services increased to 64.4 percent in 2018, up from 60.2 percent in 2017 driven by a higher-margin advertising business. The number is well above the 6.2 percent profit margin for Xiaomi smartphones, and the firm can potentially generate more internet-based income if it’s able to step up monetization of the 242.1 million monthly users on its ecosystems apps.

The headline has been corrected.

Foot Locker takes a minority stake in kids clothing subscription service Rockets of Awesome

Foot Locker is taking a stake in the subscription-based shopping service, Rockets of Awesome – a startup that’s something of a “StitchFix for kids,” in that it sends out a personalized selection of children’s apparel in seasonal boxes, shipped to customers’ homes. The companies announced today that Foot Locker has made a $12.5 million minority investment into Launch Kids, Inc., dba Rockets of Awesome, which is part of the startup’s larger $19.5 million Series C.

The investment will see the two companies entering into a partnership, which involves Kids Foot Locker creating exclusive Rockets of Awesome in-store destinations where its customers can buy Rockets of Awesome products in the U.S. It will also begin to sell Rockets of Awesome merchandise on its website, kidsfootlocker.com.

This is a notable expansion for the kids’ clothing subscription service, which before now had focused on its personalized boxes and its own e-commerce sales, not an in-store presence.

The idea for Rockets of Awesome is similar to that of other clothing-in-a-box services, most notably StitchFix or Trunk Club for adults. But it also rivals those aimed at children like Kidbox, which announced a $15.3 million raise of its own last spring.

Launched in 2016, Rockets of Awesome first emerged from founder Rachel Blumenthal’s earlier startup, Cricket’s Circle.

As a parent herself (married to Warby Parker co-founder Neil Blumenthal), she was first focused on building a shopping site for new moms. Through user feedback, she learned that parents still ran into challenges shopping for kids as they got past the car seat and stroller phase. Taking kids shopping in stores is often frustrating, and kids outgrow clothes quickly – meaning last year’s summer or winter apparel needs a refresh the following year.

This led to the creation of Rockets of Awesome. The service has parents take a short quiz about their kids’ style preferences, then ships out seasonal boxes of quality, but affordable, clothing. Parents and children can then sort through the clothing, and send back what they don’t want. Parents can also shop Rockets of Awesome clothing from its website.

Each box includes pieces priced at $16 through $38, which tends to be slightly higher than rival Kidbox’s price points – Kidsbox’ whole box of half a dozen pieces can be had for under $100. Rockets of Awesome’s “whole box” deal is $150.

Having personally used both Rockets of Awesome and Kidbox, I’ve found the former’s clothing more expensive, yes, – but also more on-trend. For instance, it quickly picked up on the recent surge of interest in designs where the sequins flip over to change the pattern, unicorns and feminine takes on camo, in girls clothing.

Meanwhile Kidbox – perhaps because it relies on existing brands like Adidas, New Balance, Lucky Brand, and others to fill out its boxes – seems to ship more staples. Both are valuable services in their own way. However, Rockets of Awesome currently sees more traffic than Kidbox, according to data from SimilarWeb, which reports a higher website rank for the former both in the U.S. and worldwide.

Like others in this space, Rockets of Awesome also leverages technology to make data-driven decisions about merchandise R&D – meaning what kids like and parents buy will influence what sorts of things the company sells, combined with elements of human editorial curation.

The Foot Locker investment will allow Rockets of Awesome to scale its retail presence more quickly, than if it tried to do so on its own. And it will serve as a means of introducing parents to the Rockets of Awesome brand.

Foot Locker, meanwhile, benefits not only by diversifying its in-store assortment, but by grabbing a stake in a growing, digital-first brand at a time when the way customers shop is changing. Foot Locker has made other investments in digital-first companies, including sneaker marketplace GOAT, women’s luxury activewear brand Carbon38, tactical play and lifestyle brand Super Heroic, and footwear design academy Pensole.

“Rockets of Awesome is advancing the way parents shop for their kids. Foot Locker is also committed to evolving with the ever-changing retail landscape and adjusting to the speed of our customers. We are excited that our partnership with Rockets of Awesome will enable Kids Foot Locker to deliver new, innovative products and experiences,” said Richard Johnson, Foot Locker Chairman and CEO in a statement.

“We look forward to collaborating with them on brand development, product collections, and go-to-market plans to help realize additional growth for both companies.”

However, Rockets of Awesome tells TechCrunch there are no current plans for Foot Locker items to be included in its boxes. Instead, it aims to leverage Foot Locker’s experience to expand its omnichannel retail channels.

The next step will be to open its own experiential retail location in time for back-to-school.

“Our partnership with Foot Locker is a powerful validation of Rockets of Awesome’s ongoing progress in our mission to simplify parents’ lives and enable them to celebrate real life with their kids,” said Blumenthal. “With Foot Locker’s support, we look forward to bringing our unique, high-quality merchandise and convenient shopping experience to even more families everywhere,” she added.

Foot Locker offers 393 Kids Foot Locker locations across the U.S. and Canada, but it didn’t announce today how many would feature the Rockets of Awesome store-in-store shopping experience, or on what timeframe.

Along with Foot Locker, the Series C round included participation from August Capital, Forerunner Ventures, General Catalyst, Founders Fund, Burda Principal Investments, ACM and Signalfire. It brings the company’s total funding to $49 million, according to Crunchbase.

 

 

Target announces launch of its curated, third-party marketplace, Target+

Target this morning announced Target+, a new initiative designed to expand the assortment on Target.com with merchandise from third-party sellers. But unlike with Walmart and Amazon’s marketplaces, Target is taking a more curated approach as to how sellers will be added to its program. The retailer says it’s starting with “thoughtfully selected” additions in areas like home, toys, electronics and sporting goods.

While any seller can apply to join Amazon or Walmart’s marketplace, there’s no such process for joining Target+. Instead, Target explains that each partner is “carefully selected” and then invited into the program – a move it hopes will help keep quality high.

At launch, guests will be able to discover an expanded array of running shoes, outdoor décor, patio accessories, a bigger selection of STEM learning toys, new musical instruments, and baseball gear from both national and speciality sellers, says Target. Some of the current sellers include: SVSportsMizunoKaplan Early Learning CompanySerenity Health & Home Décor and Music123.

Over time, more products and sellers will be added, as Target learns more about guest needs.

Offering only a curated selection means Target+ won’t face the same struggles as other retailers when it comes to policing their third-party marketplaces for offensive content – like the racist merchandise found on Amazon, for instance; the toilet seat covers featuring holy text, politically charged and controversial apparel; and other items. Because these marketplaces are so large, offensive or just generally questionable or odd merchandise repeatedly surfaces, resulting in bad PR for the marketplace’s host, like Amazon, Walmart or eBay.

Target will avoid this issue by way of its curation, but it will come at the expense of having a larger third-party assortment.

Target+ merchandise will also be integrated into the site within the appropriate categories, so the items can be discovered through both browsing and search. There’s no way to just search for “Target+” items.

In addition, shoppers will have the same perks when buying from third parties as they do when buying from Target’s own assortment, including 5 percent off when using their Target REDcard, free shipping, and in-store returns.

Before Target+, a portion of Target’s assortment was shipped directly from third-party vendors, but guests were purchasing the items from Target. With Target+, products are purchased and shipped from the third-party vendors.

“Guests look to Target for great products. With Target +, we aim to give them easy access to even more great products by partnering with best-in-class specialty and national brands that will help guests save and get more done in just one stop to Target.com,” said Rick Gomez, Target’s chief marketing officer and digital officer, in a statement.

The launch of Target+ follows Walmart’s recent announcement that it would expand its 2-day shipping program to the millions of products offered by its own marketplace sellers, to better compete with Fulfillment by Amazon, which allows sellers to make their items available on Prime. And, like Target, Walmart aims to leverage its brick-and-mortar stores for third-party merchandise returns.

Both moves put Amazon at more of a disadvantage, as its brick-and-mortar footprint is limited to its Whole Foods stores, and various bookstores and other shops in urban metros. Walmart, on the other hand, has 140 million weekly in-store customers, and says 90 percent of Americans live within 10 miles of a Walmart store.

Target, meanwhile, has 1,850 retail stores in the U.S. compared with roughly 475 Whole Foods stores in the U.S., and over 4,700 Walmart locations in the U.S. (excluding Sam’s Club.)

 

Walmart tech incubator Store No. 8 launches VR startup Spatial&

Walmart’s tech incubator Store N°8 today launched its next startup, a VR merchandising company called Spatial&. The company offers VR experiences that enable customers to connect with merchandise, and is kicking things off by collaborating with DreamWorks Animation VR tour. At select Walmart locations across the U.S., Spatial& will set up a VR experience in the parking lot, allowing customers to visit DreamWorks’ “How to Train Your Dragon: The Hidden World” through VR. Afterwards, customers are directed to a branded, physical gift shop where they can make purchases.

The experience is meant to help DreamWorks market their film ahead of its February 22 release, while Walmart gets to hawk film merchandise to its customers.

It’s not all that different from the “exit through the gift shop” concept found at theme parks.

Upon entering the experience, customers are greeted by the film’s characters Ruffnut and Tuffnut, and are then led into a “dragon’s cave” where they’ll put on VR headsets and get seated in Positron motion VR chairs powered by the HP VR backpack.

The VR story they engage with will take them on a five-minute journey into the movie’s world, where they interact with other characters, including  Astrid, Hiccup, Toothless, Hookfang and more. During this experience, participants will have a multi-sensory encounter, thanks to hand tracking and 6DOF (6 degrees of freedom) in the Voyager VR motion chair.

When the experience wraps, customers are guided into a themed gift shop where they can buy merchandise like plush toys, action figures, DVDs, video games, and more.

Some merchandise from this collection will also be sold across 2,000 Walmart stores – not only those with the VR experience.

On the technology side, Spatial& and DreamWorks leveraged servers and workstations with Intel Xeon Scalable processors to stitch together high-res images and 360-degree VR videos. For the experience itself, the startup uses HP Windows Mixed Reality headsets, Omen by HP Mindframe Headsets, and PCs with Intel Core processors. Outside, parents can follow along with what their children are viewing via Intel-powered Omen by HP Gaming Laptops.

“We have set an extremely high bar for quality and innovation for the How to Train Your Dragon franchise, and our partners at Spatial& exceeded our expectations with their incredible work on this project,” said Abhijay Prakash, chief operating officer of DreamWorks Feature Animation, in a statement about the launch.“This latest Dragon film displays DreamWorks’ best in class creative abilities combined with state of the art advances in animation technology, and we are thrilled that this experience created by Spatial& lives up to that reputation while allowing fans to journey straight to the center of this unique world we’ve created for the film. It’s a truly exhilarating experience,” Prakash added.

Walmart says the experience will go live at 16 stores in the U.S., starting this weekend and continuing through early April.

Those locations include the following:

  • Burbank, California (1301 N Victory Place) – February 15-16
  • Pico Rivera, California (8500 Washington Boulevard) – February 17-19
  • Anaheim, California (440 Euclid Street) – February 22-23
  • San Bernardino, California (4001 Hallmark Parkway) – February 24-26
  • Las Vegas, Nevada (5200 S Fort Apache Road) – March 1-2
  • North Las Vegas, Nevada (6464 N Decatur Boulevard) – March 3-5
  • Glendale, Arizona (5010 N 95th Avenue) – March 8-9
  • Gilbert, Arizona (2501 S Market Street) – March 10-12
  • San Antonio, Texas (8923 W Military Drive) – March 15-16
  • New Braunfels, Texas (1209 S Interstate 35) – March 17-19
  • Grand Prairie, Texas (2225 I-20) – March 22-23
  • Allen, Texas (730 W Exchange Parkway) – March 24-26
  • Sugar Land, Texas (345 Highway 6) – March 29-30
  • Katy, Texas (1313 N Fry Road) – March 31-April 2
  • Rogers, Arkansas (4208 S Pleasant Crossing Boulevard) – April 5-6
  • Bentonville, Arkansas (406 S Walton Boulevard) – April 7-9

Spatial& is one of several tech startups being incubated by Walmart’s Store No. 8, which launched in 2017 to focus on retail innovation. Other businesses being incubated there include conversational commerce startup Jetblack, from Rent the Runway co-founder Jenny Fleiss; stealth startup Franklin from Wim Yogurt founder Bart Stein; and AI lab Project Kepler.

How AR is Enhancing Retail

In a recent A16Z podcast, Marc Andreessen said he believes that VR will be “like 1000 times bigger” than AR. He also recognised that this is a very contrarian view to consensus in the Valley, which...

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Retail technology platform Relex raises $200M from TCV

Amazon’s formidable presence in the world of retail stems partly from the fact that it’s just not a commerce giant, it’s also a tech company — building solutions and platforms in house that make its processes, from figuring out what to sell, to how much to have on hand and how best to distribute it — more efficient and smarter than those of its competition. Now, one of the startups that is building retail technology to help those that are not Amazon compete better with it, has raised a significant round of funding to meet that challenge.

Relex — a company out of Finland that focuses on retail planning solutions by helping both brick-and-mortar as well as e-commerce companies make better forecasts of how products will sell using AI and machine learning, and in turn giving those retailers guidance on how and what should be stocked for purchasing — is today announcing that it has raised $200 million from TCV. The VC giant — which has backed iconic companies like Facebook, Airbnb, Netflix, Spotify and Splunk — last week announced a new $3 billion fund and this is the first investment out of it that is being made public.

Relex is not disclosing its valuation but from what I understand it’s a minority stake, which would put it at between $400 million and $500 million. The company has been around for a few years but has largely been very capital efficient, raising only between $20 million and $30 million before this from Summit Partners, with much of that sum still in the bank.

That lack of song and dance around VC funding also helped keep the company relatively under radar, even while it has quietly grown to work with customers like supermarkets Albertson’s in the US, Morrisons in the UK and a host of others. Business today is mostly in North America and Europe, with the US growing the fastest, CEO Mikko Kärkkäinen — who co-founded the company with Johanna Småros and Michael Falck — said in an interview.

While the company has already been growing at a steady clip — Kärkkäinen said sales have been expanding by 50 percent each year for a while now — the plan now will be to accelerate that.

Relex competes with management systems from SAP, JDA and Oracle, but Kärkkäinen said that these are largely “legacy” solutions, in that they do not take advantage of advances in areas like machine learning and cloud computing — both of which form the core of what Relex uses — to crunch more data more intelligently.

“Most retailers are not tech companies, and Relex is a clear leader among a lot of legacy players,” said TCV general partner John Doran, who led the deal.

Significantly, that’s an approach that the elephant in the room pioneered and has used to great effect becoming one of the biggest companies in the world.

“Amazon has driven quite a lot of change in the industry,” Kärkkäinen said (he’s very typically Finnish and understated). “But we like to see ourselves as an antidote to Amazon.”

Brick-and-mortar stores are an obvious target for a company like Relex, given that shelf space and real estate are costs that these kinds of retailers have to grapple with more than online sellers. But in fact Kärkkäinen said that e-commerce companies (given that’s also where Amazon primarily operates too) have been an equal target and customer base. “For these, we might be the only solution they have purchased that has not been developed in house.”

The funding will be used in two ways. First, to give the company’s sales a boost especially in the US, where business is growing the fastest at the moment. And second, to develop more services on its current platform.

For example, the focus up to now has been on demand forecasting, Kärkkäinen said, and how that effects prices and supply, but it would like to expand its coverage also to labor optimisation alongside that; in other words, how best to staff a business according to forecasts and demands.

Of course, while Amazon is the big competition for all retailers, they potentially also exist as a partner. The company regularly productizes its own in-house services, and it will be interesting to see how and if that translates to Amazon emerging as a competitor to Relex down the line.

Amazon debuts Showroom, a visual shopping experience for home furnishings

Amazon just over a year ago launched its first in-home furniture brands, with private labels Rivet and Stone & Beam. This past fall, it began experimenting with a new, more visual way to shop for furniture and other merchandise with its Pinterest-like recommendation service Scout. Now, Amazon is venturing further into home furnishings with the debut of Amazon Showroom, a visual design tool that allows you to place furniture into a virtual living room, customize the décor, then shop the look.

The retailer didn’t formally announce the launch of Amazon Showroom, but a spokesperson confirmed it’s a recent test that’s now available on Amazon.com and in the Amazon mobile app.

You can access it from the “Accounts & Lists” drop-down on the web; the Home, Garden & Pets department on the web; or the Home & Kitchen department on the mobile app.

Currently, the new feature is focused on helping Amazon shoppers put together a living room. In a virtual setting, you can make adjustments to the wall color and the flooring, then swap out each item in the space with one of your own choosing — including the sofa, coffee table, chair, end table, lamp, rug and even the art on the wall.

To do so, click on the piece in question, then pick another from the right-side panel where a scrollable list of options are available, along with their prices. This selection can be filtered by a number of factors, as well, like price, style, color, material, brand and star rating.

Not surprisingly, Amazon’s own home furnishing brands are heavily featured here.

As you work on your project, you can save your room design to pull up later. And you can save more than one room design, if you’re trying to decide between different styles. When satisfied, an “Add to cart” button lets you place all into your cart for checkout with just one click.

Amazon Showroom — a name that’s almost a cruel reference to Amazon’s ability to turn brick-and-mortar stores into showrooms for online shoppers — isn’t the retailer’s first attempt at helping shoppers visualize items in their home ahead of purchase. The company also launched an AR shopping feature in its app in 2017, which allows you to place a virtual item in your camera view to see how it goes in your own room. That can be useful if shopping for a single item, but less so when designing a complete room.

Home furnishings is still an emerging category for online retail, not only because they’re hard to visualize, but also because heavy items are expensive to ship. However, major retailers see the potential in this growing market.

Walmart, for example, launched a new home shopping site for furniture and décor last year, which features its own in-house brands and more visual, editorial-style imagery. It has also snapped up other home furnishing and décor retailers, including Hayneedle and recently, Art.com, and is building its own visual search.

Amazon confirmed the launch of Showroom in a statement.

The retailer wouldn’t say when the feature debuted, exactly, but a Twitter account was tweeting links to a pre-production site earlier in December. It’s also unclear at this time if Amazon Showroom was built entirely in-house.

“Amazon Showroom is a new way for customers to visualize their home furnishing purchases when shopping online,” a spokesperson told TechCrunch. “Amazon Showroom presents customers with a virtual living room, where they can customize the décor and furniture selection providing the ability to visually compare to scale representations of furniture items together in a room to determine how an item will fit with the style of a room and work with other complimentary pieces. The result is a photorealistic rendering of a room that answers the question: ‘How will this all look together?’,” they said.

The feature is live for all customers on the web and in the Amazon app.

Report: Amazon is planning a Whole Foods expansion to benefit Prime Now

Amazon is planning a Whole Foods expansion in the U.S., according to a report by The Wall Street Journal published this weekend. The goal is to put more customers within the range of Amazon’s two-hour Prime Now delivery service, including those in suburban areas outside cities, as well as those in regions where the grocer has yet to establish a presence.

Currently, Amazon’s Prime Now delivery service offers two-hour delivery in over 60 U.S. cities, and thirty minute-plus grocery pickup in nearly 30 cities. Amazon is planning to expand those services to almost all its 475 Whole Foods stores, the report said, citing sources.

The retailer will also continue to use perks for Prime members to acquire and retain customers, much as it does today.

Because of its lack of a brick-and-mortar footprint, many U.S. consumers living in the outskirts of cities or in more rural areas don’t have access to Amazon’s Prime Now two-hour delivery service. However, they do have access to Walmart stores, which today offering their own online grocery shopping service with pickup and delivery options in a number of markets.

Walmart says that 140 million customers shop its stores weekly, and 90 percent of Americans today live within 10 miles of one of its locations. That makes it a significant challenger to Amazon in terms of offering fast delivery and pickup options. It also doesn’t require an annual membership.

Other companies are competing with Amazon on same-day delivery, too, including Instacart and Target’s Shipt. Target is also rolling out a curbside pickup service called Drive Up, and is planning to expand Shipt’s assortment and reach in 2019.

The WSJ report didn’t confirm store locations, but did note Amazon was scouting retail spaces in parts of Idaho, southern Utah and Wyoming. Some of these were slightly larger than average Whole Foods stores, at 45,000 sq ft. – which hints at their ability to operate as a hub for delivery and pickup, in addition to being a traditional grocery store.

 

New e-commerce restrictions in India just ruined Christmas for Amazon and Walmart

The Indian government is playing the role of festive party pooper for Walmart and Amazon after it announced new regulations that look set to impede the U.S. duo’s efforts to grow their businesses in India.

Online commerce in the country is tipped to surpass $100 billion per year by 2022 up from $35 billion today as more Indians come online, according to a report co-authored by PwC. But 2019 could be a very different year after an update to the country’s policy for foreign direct investment (FDI) appeared to end the practice of discounts, exclusive sales and more.

The three main takeaways from the new policy, which will go live on February 1, are a ban on exclusive sales, the outlawing of retailers selling products on platforms they count as investors, and restrictions on discounts and cashback.

Those first two clauses are pretty clear and will have a significant impact on Amazon — which has pumped some $5 billion into India — and Walmart, which forked out $16 billion to buy India-based Flipkart.

Both online retailers have been able to make a splash by tying up with brands for exclusive online sales, particularly in the smartphone space where, for example, Amazon has worked with Xiaomi and Flipkart has collaborated with Oppo. The new guideline would appear to end that practice, while adding further restrictions to complicate relationships with vendors. From February, brands will be forbidden from selling more than 25 percent of their sales via any single e-commerce marketplace.

Walmart bought Flipkart for $16 billion, but already both founders of the Indian company have left [Photo by AFP/Getty Images]

Beyond restricting companies like Oppo — Xiaomi prioritizes its own Mi.com site for sales — that 25 percent ruling is a headache for Amazon, which operates a number of joint ventures with Indian retailers. Those JVs were designed to circumvent a 2016 ruling that prevented foreign e-commerce businesses from owning inventory, but now they seem outlawed.

Cloudtail India (a 49:51 JV between Amazon and Catamaran Ventures) is Amazon’s biggest seller while another major one is Appario Retail, a collaboration with Patni Group. Together, both sell more than 25 percent of product on Amazon, use exclusive deals and are part-owned by Amazon. That’s three strikes.

Those rules will have Amazon and Walmart-Flipkart working to find alternatives, but there’s more with restrictions on discounts and cashback offers, which could massively cramp the appeal of online commerce, which has been to undercut brick and mortar retailers with heavy subsidies.

Here’s the relevant part of the note:

E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field…

Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory.

Exactly what constitutes a “level playing field” or “fair” may be open to interpretation, but clearly this update gives offline retailers a route to protest pricing on online retail sites.

The first thought is that these new updates are focused on the core business model tenants that make e-commerce what it is today.

“It will kill competition and there will be nothing for online retailers to differentiate on,” Amarjeet Singh, a partner at KPMG, href="https://qz.com/india/1508340/indias-new-e-commerce-fdi-rules-may-hurt-amazon-flipkart/"> told Quartz in a comment.

The new regulation is widely seen as a response to concerns from smaller sellers, who feel marginalized and powerless compared to larger organizations. Now, with capital-intensive policies such as discounts, exclusive sales relationships and strategic investment off the table, smaller players will gain a foothold and be able to do more from e-commerce, that’s according to Kunal Bahl, CEO of Snapdeal — a niche e-commerce firm that once competed head-to-head with Flipkart and Amazon.

It’s shaping up to be a very different year for e-commerce in India in 2019.