Specific new rules related to eCommerce have recently been implemented by the Modi government in India which has prompted eCommerce giant, Amazon, to pull many of its products off its site. The withdrawal, started late this Thursday. This includes products like Echo speakers, batteries and floor cleaners, with a source claiming, “The company has no choice, they are fulfilling a compliance requirement ... customers will suffer.”
The Indian eCommerce sector has recently seen a significant influx of investments from foreign companies, including Walmart’s investment in the Indian eCommerce site, Flipkart. This has led the Indian government to revise its foreign direct investment (FDI) rules for the eCommerce sector, one of which bars online retailers from selling products via the vendors they have an equity interest in, besides promoting the prevention of making deals with sellers in order to make them use their platform exclusively to conduct sales.
As such, products from Cloudtail, a company in which Amazon has an indirect equity interest, and Shopper’s Stop, of which Amazon owns 5%, have started disappearing from the website. Other products that have been removed from the site include Amazon’s own series of Echo speakers, home cleaning products from Presto, and chargers and batteries from Amazon Basics.
Despite Amazon and Walmart’s having lobbied against the new India eCommerce rules, requesting a delay in their implementation, the Indian government stood its ground. And now Amazon is trying to work in a way so that its customers and sellers are minimally impacted by the changes. Amazon Chief Financial Officer Brian Olsavsky took to a conference to claim that the Indian market is a good long-run investment, despite market situations being “a bit fluid right now.”
Coming after a highly successful holiday season, the uncertainty of the Indian market, one of the markets of maximum growth for Amazon, has resulted in a forecast of first-quarter sales below initial Wall Street estimates.
Flipkart CEO Kalyan Krishnamurthy, for his part, had warned of a significant customer disruption if the new rules were not implemented after a delay; expressing disappointment at what he considers to be a hasty implementation on the part of the government. He has assured compliance nonetheless.
We believe that policy should be created in a consultative, market-driven manner and we will continue to work with the government to promote fair pro-growth policies - Rajneesh Kumar, senior vice president & chief of corporate affairs
The new India eCommerce rules can be seen as the Indian Prime Minister Narendra Modi’s administration’s attempt to be in the good books of the small traders in India while they prepare for the upcoming general elections scheduled to be held this May.
Be that as it may, the rules shall prove to be advantageous to small traders who claim that the eCommerce giants create an unfair marketplace by using their buying power and control over inventory from affiliated vendors to offer deep discounts on some products. The new policy is all set to bar all such arrangements, forcing companies like Amazon to revise their business structures and face a higher compliance cost.
As it stands now, exclusive deals with sellers shall be discontinued, with messages associated with disappeared products reading “We don’t know when or if this item will be back in stock.”