No breather on new e-comm rules; heat on both players, customers

Andrew Cummings
February 3, 2019

The rules will reportedly play as a major advantage for small retailers who have been longing for tougher competition rules, considering how their biggest competitors Amazon and Flipkart had an unfair advantage. The e-commerce market in India has more than tripled since 2015, powered by smartphone penetration and favorable demographics with a median age of 28. Arvind Singhal of consultancy Technopak Advisors Pvt, estimates their revenue growth could fall to 15% in coming months from 25-30% previously.

A Mint report from yesterday stated that both Amazon and Flipkart were hopeful towards a deadline extension, engaging with government officials directly and indirectly through trade bodies. New government-issued norms, which kicked in just today, prevent foreign firms from selling their products directly to consumers. After losing the bid for Flipkart, Amazon committed to spend $5 billion in India, where it sees the fastest Prime membership growth rate.

Major stakeholders led by Walmart and Amazon had sought a six-month extension even though other players like Snapdeal and offline traders led by the Confederation of All India Traders supported the government's move. You will not find products with Amazon Basics and Solimo brands. Would-be buyers of Echo speakers on Amazon India saw a message reading: "We don't know when or if this item will be back in stock".

Exclusive deals with the sellers, in compliance with new norms, will also be discontinued, the sources said. And they may have to develop India-specific private labels, which the government allows. Interestingly, the seller is now engaged in the selling of Kindle devices. This is because Cloudtail India itself is a joint venture company between and Catamaran Ventures, and the new rules prohibit vendor entities with equity interests from participating in sale activities. "It's likely to disrupt availability for customers", he said.

Amazon and Walmart have huge stakes in India.

That could also put Amazon's plans to expand in food retailing into jeopardy. Last summer the government approved an Amazon proposal to invest $500m to retail food products.

This policy would affect Amazon's price, selection and convenience for sellers and customers, Amazon's CFO said during its earnings call, ET reported.

Such strategies by global companies have been controversial in a country where organized retail accounts for only about 10 percent of a market dominated by small sellers and mom-and-pop stores.

The Government of India has rolled out its revised e-commerce policy, which has placed severe restrictions for companies doing e-commerce business with FDI.

On Friday, Flipkart said it was disappointed the government had made a decision to implement the regulations in haste, adding, however, that it would do everything to be compliant. The Bengaluru-based company added that it remains committed to compliance "despite the significant work that is required to change our supply chains and systems".

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