Amazon.com Inc. and Walmart Inc. suffered a blow in India, the next frontier of e-commerce, when the government rejected requests to defer a deadline that requires online retailers to comply with stricter new rules as of Friday.
That means that Flipkart, owned by Amazon and Walmart, the two largest online retailers in India that dominate the market, will not be able to sell the products of the companies in which they have commercial interests, which will drastically reduce the categories and products. offered to buyers.
The regulations disclosed at the end of December also prohibit online retailers from allowing companies to sell products exclusively on any of the platforms. This prevents them from making deals to promote items such as new smart phones or affordable televisions that could not be sold off-line or through competitors. The strict rules also prohibit online retailers from influencing prices, a step that could mean the end of the great discounts offered to attract new online shoppers.
Such strategies by global companies have been controversial in a country where organized retail sales represent only about 10 percent of a market dominated by small vendors and family stores. The government’s decision on e-commerce rules comes months before a crucial general election. Traditionally, small merchants have been part of a support base for the ruling Bharatiya Janata Party.
Amazon and Walmart have big bets in India. Amazon has already committed to invest more than $ 5.5 billion in the country, and Walmart spent $ 16 billion last year to acquire a start-up company, Flipkart Online Services Pvt.
The two online retailers have accumulated vast inventories in companies in which they have commercial interests and have sought an extension of four to six months to help unload those products. The decision to go ahead with the new rules scheduled was announced on Thursday night in a statement from the Department of Industrial Policy and Promotion of India.
Now, products must be removed from e-commerce platforms at night.
“While we remain committed to complying with all laws and regulations, we will continue to work with the government to seek clarifications that will help us decide on the future course of action, as well as minimize the impact on our customers and vendors,” he said. Amazon in a statement on Thursday night.
Analysts at Morgan Stanley estimate that Amazon will have $ 6.5 billion in sales in India in 2019, which represents 2.3 percent of the company’s total revenues. Even if Amazon’s business in India stopped growing in 2019, according to Morgan Stanley it would be an extreme result, it would only slow the growth of Amazon’s overall revenue by about half a percent for the year.
Flipkart did not respond to the calls for comments. He had previously warned in a letter of “significant customer disruption” and is also said to have told the government that such a measure would stop the growth of e-commerce in India.