NEW DELHI — The Walmart Inc. subsidiary Flipkart and Amazon India — the Asian country’s two leading e-commerce players — on Friday removed scores of products from their sites in response to the government’s new regulatory regime.
The rules — although still being interpreted — ban e-tailers from selling products from vendors in which they have an equity stake. Vendors with more than 25 percent of their products on a marketplace cannot sell on that platform, either.
“The current clarification clearly bars marketplace e-commerce entities from influencing price and creates a level playing field for sellers,” said Kumar Rajagopalan, the chief executive officer of the Retailers Association of India.
India had already barred foreign direct investment in the inventory-based model of e-commerce, so Flipkart and Amazon India follow the marketplace model, in which sellers use the sites as a platform to reach customers. Amazon has been working through subsidiaries such as Cloudtail and Appario Retail to manage its own inventory with local partners, as has Flipkart through its investment in WS Retail, and its fashion-focused subsidiary Myntra through Vector e-commerce.
Clothing from department store chain Shoppers Stop, for instance, has been removed from Amazon, which has a 5 percent stake in the company.
“While we have taken the necessary steps to comply with the new rules, we continue to await further clarity from the Department for Promotion of Industry and Internal Trade,” a spokesperson for Shoppers Stop told WWD.
Analysts noted that it was unfair that Amazon could stock and sell products from all the other retailers except for Shoppers Stop, in which it has a stake.
The government’s announcement on the new rules on e-commerce in December sparked debate. Although the U.S.-India Strategic Partnership Forum at the time called the policy “regressive” and “without sufficient consultative process,” the Confederation of All India Traders countered that global companies were trying to configure Indian retail to their advantage. They alleged that the e-commerce companies like Flipkart and Amazon India were offering deeper discounts on products because of their control over inventory from affiliated vendors, leaving smaller companies unable to compete and causing an imbalance in the market.
It was widely expected that requests by Flipkart and Amazon India for a four- to six-month extension to when the policy would take effect would be agreed to by the government. However, on Thursday the Department for Promotion of Industry and Internal Trade said in a statement, “After due consideration, it has been decided, with the approval of the competent authority, not to extend the deadline,” and the rules would become effective as originally scheduled on Friday.
India is seen as a key market for global retailers, with its $750 billion retail market growing at more than 20 percent annually. According to government figures this week, growth in Indian gross domestic product over the last two years has averaged 7.4 percent, the same figure that the International Monetary Fund has projected for 2019. The ongoing digital transformation is expected to grow the Indian e-commerce marketplace from about $50 billion in 2018 to $200 billion by 2026, an annual growth rate of 51 percent, the highest in the world, according to the India Brand Equity Foundation, a knowledge center for global investors by the Indian Ministry of Commerce.
U.S. online marketplace eBay is expected to make another bid for the Indian market. “There won’t be one or two parties that make up the entirety of the Indian e-commerce opportunity and we certainly intend to have a share of it,” Devin Wenig, ceo of eBay, said at an investors call earlier this week.
Retail analysts have noted the rules for the e-commerce sector are “clearly an election gimmick,” with small retailers being a large voter base for the country. More than 90 percent of Indian retail is still in the unorganized sector and are key for appeasement before the Indian general election in May.
Smaller e-commerce players are pleased. Kunal Bahl, ceo of Snapdeal, an Indian e-commerce player, said the change of policy was a welcome one. “These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce,” he said.