New e-commerce rules could shake up the market and put consumers at disadvantage.
In early 2015, two years after Amazon’s entry into India, Reddit tweeted a photograph of a delivery box of the US online giant at a Flipkart office reception. The photo sparked a barrage of twitter exchanges between Amazon and Flipkart, then India’s largest e-commerce firm, and also signalled the start a fierce business rivalry that continues to the day. The next few years brought a bonanza for Indians as the two e-tail giants ramped up their rivalry with eye-popping discounts and “sales” that appeared to defy gravity. But the story is about to change from February 1.
In a recent notification that could change how e-commerce functions in India, the government has barred online retailers from offering massive discounts, and also limits the amount of sales a single company can give. The move is seen as an attempt to prevent predatory pricing and deep discounts which have hit millions of small shopkeepers, especially in areas like mobile phones and electronics. According to market data, around 60 per cent of mobile phones were sold through the online channel last year. These businessmen have been lobbying for government support in the face of the cut-throat rivalry between Amazon and Flipkart, which was acquired by Walmart for $16 billion last year. The local traders fear that Walmart’s entry could drive the mom-and-pop stores out of business.
Amazon and Flipkart dominate India’s e-commerce market, which is expected to rise to be worth over $32 billion by the end of the decade. Other players include Snapdeal, backed by Japan’s SoftBank, Paytm E-Commerce backed by SoftBank and Alibaba Group, and Tiger Global-backed ShopClues. People with knowledge of the market say that the new rules could have a telling impact, not just on Indian consumers but also impact company-owned sellers, especially Amazon and Flipkart.
Amazon sells a number of products through its subsidiary, Cloudtail, a joint venture between Amazon and N.R. Narayana Murthy’s Catamaran Ventures. It also has another joint venture, Appario Retail, with the Patni Group, which has emerged as one of the largest sellers on Amazon India. Similarly, Flipkart till recently had WS Retail, promoted by the founders of Flipkart. Though the company has been spun off from the parent and is an independent seller now, it is still the largest seller on Flipkart. The new rules will bar these companies from selling on their parent platforms.
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January 28, 2019