Picture source: Visual China
Text | Zhixiang.com (ID: passagegroup), author | Du Zhanyu
British Prime Minister Parmeston, who launched the Opium War against China and suppressed the Indian national uprising, has a famous saying: There are no eternal allies, no eternal enemies, only eternal interests. The same is true for the
shopping mall. , Amazon and Walmart, which were fighting against each other last year, have now stepped into the same trenches and started to form teams to jointly lobby against the Indian government's new e-commerce regulations, and demanded that the Indian government postpone the deadline for implementing the new regulations on February 1. The defeat of local state elections has forced Prime Minister Modi and the BJP to face up to the key vote of local businessmen. Some analysts believe that the new e-commerce regulations that will come into effect on February 1 will help Modi-led BJP win the support of local traders.
The Ministry of Trade of India previously stated that online malls must treat all suppliers equally and provide the same terms. In practice, this means prohibiting e-commerce companies from forcing sellers to exclusively sell specialty products on their platforms and limiting ownership or control of e-commerce platforms over market inventory.
The Indian government said the changes will promote fair trade and curb the influence of foreign companies when pricing their local products.
, while creating a more fair market environment, it is a heavy blow to Amazon and Walmart-owned Flipkart. As the new policy affects, e-commerce platforms such as their e-commerce platforms may not be able to sell private brand products (such as Amazon's Echo smart speakers) at significant discounts, and competitors will have the opportunity to sell these previous exclusive products.
But anyway, the Indian e-commerce market is one of the fastest growing markets in the world, and American giants are trying to open up India's consumer market, tap and grasp its growth potential. Last year, Walmart acquired Flipkart, a local Indian e-commerce company, for a sky-high price of $16 billion, while Amazon invested in offline retailer Shopper’s Stop, and other reports pointed out that Amazon is also in-depth negotiations on investing in future retail.
Cat and Mouse Game
According to its local vision statement, Amazon’s goal is to “change the way India buys and sells.” This is a grand task, as is the same as the average Jeff Bezos early project, and is unprofitable. Amazon lost about $3 billion in its international business last year, with analysts saying most of it happening in India.
In May last year, Walmart spent $16 billion to acquire Flipkart, a major competitor of Amazon India, a local online retailer in India. Alibaba Group Holdings Ltd. has also invested in India's popular online retailer Paytm E-commerce and holds a stake in BigBasket, the country's largest online grocer.
Amazon must follow up. India is now a must-fight for retailers around the world and is a key market that cannot be missed. It has a population of more than 1 billion, but the proportion of people with smartphones is small, while the country's continued growth in the middle class has begun to start. Retail giants are willing to take a risk to enter the market because their potential is enough to provide exponential growth opportunities for online consumption.
Previously, India's regulatory policies prohibited foreign investors from directly operating online platforms and did not allow them to sell any products other than food to consumers directly.
, but there are policies above and countermeasures below. Foreign investors took money to open the way and bypassed this rule by cooperating with local companies to establish joint ventures. For example, after this operation, all products on the Amazon platform will be sold by independent sellers.
In addition, inventories-based activities in India prohibit foreign direct investment under current policies. But through the companies it holds or supports, e-commerce giants like Amazon and Flipkart have gained a lot of Indian inventory, whereby they can sell goods directly or through the merchants they support. Cloudtail is one of these sellers. It is affiliated with a joint venture founded by Amazon and billionaire Narayana Murthy, co-founder of Infosys .The introduction of new e-commerce regulations in
is aimed at curbing the exploitation of existing vulnerabilities by foreign companies. Once the new policy takes effect, the two American giants will have to sell all their shares in such companies. Moreover, foreign investors who hold equity in a platform are not allowed to sell their products on the platform.
"E-commerce giants united to oppose the new regulations, which is normal because they invested more than $20 billion in the Indian market." Satish Meena, an analyst at Forrester Research in New Delhi, said, "In the next few years, the two companies will continue to invest at least $10 billion, and they will use these funds to leverage."
Earlier this month, Amazon evaluated the new policy and said it would cooperate with the government when necessary, avoiding the situation of joint lobbying, while Flipkart did not comment.
New e-commerce policy related to the Prime Minister's election
html The unfavorable situation of local state elections in November has forced Prime Minister Modi's BJP to face up to the key vote of local businessmen. Some analysts at believe that the new e-commerce regulations will take effect on February 1, which will help Prime Minister Modi's BJP win the support of local traders and win the votes in their hands.In fact, in early December, a group of small and medium-sized online retailers on Amazon and Flipkart platforms wrote to the Prime Minister’s Office (PMO), claiming that the e-commerce giant is taking advantage of small sellers and seeking PMO intervention to safeguard their interests.
All India Online Vendors Association (AIOVA) accused these e-commerce platforms of practicing unregulated and anti-competitive business models. In October last year, AIOVA also filed a petition with the Indian Antitrust Agency Competition Commission (CCI), accusing Amazon of favoring its stakeholders such as Cloudtail and Appario. AIOVA filed a similar complaint against Flipkart in May last year, accusing Flipkart of giving preferential treatment to some sellers, violating competition rules.
"Control of the Indian retail market has been handed over to two foreign companies." AIOVA, which represents more than 3,500 online sellers, said in a letter to PMO.
In addition to online suppliers, the Federation of Indian Traders (CAIT), RSS economic sector Swadeshi Jagran Manch and the Indian Mobile and Electronics Association (ICEA) also expressed concerns about the predatory and anti-competitive behavior of e-commerce companies and sent representatives to various departments of the Indian government to seek intervention.
Against this background, the Indian government issued "new e-commerce regulations" at the end of December.
New regulations strengthen regulations on e-commerce companies such as Flipkart and Amazon, prohibiting them from selling products of their joint-stock companies. "Entities that are held by e-commerce platforms or their group companies, and entities that are controlled by e-commerce platforms or their group companies, cannot sell their products on these e-commerce platforms or their group companies' platforms." The Ministry of Industry and Commerce said.
The Ministry of Industry and Commerce also prohibits e-commerce companies from signing exclusive product sales agreements with sellers. The revised "Foreign Direct Investment Policy for Online Retail Enterprises" pointed out that e-commerce platforms and companies that directly and indirectly participate in or jointly control suppliers should provide fair and non-discriminatory services.
In addition, these companies must submit corresponding certificates to the Reserve Bank of India (RBI) by September 30 each year to confirm that they comply with the guidelines.
These relevant regulations will come into effect on February 1, 2019.
"This is a huge achievement after a long struggle." After the new regulations were introduced, Praveen Khandelwal, secretary general of the Confederation of All India Traders, said, "If the implementation is good, illegal acts, predatory pricing and crazy discounts by e-commerce players will all become past."
, but it is not all bad news for Amazon and Wal-Mart. India's Ministry of Industry Policy and Promotion said the current policy does not prohibit private brands from selling on the platform, which means Amazon and Flipkart can still sell their products from fashion to consumer electronics.
Who is the sorrow?
Bloomberg retail analyst Jennifer Bartashus said the new regulations will bring uncertainty to Flipkart as the company evaluates all strategic changes. If discounts for foreign companies are restricted, they will affect their sales and profitability.
She also said: "Indian consumers are likely to be the first to be affected, negatively." "As discounts decrease, prices will rise. At the same time, because e-commerce platforms strictly comply with the new regulations, the selectivity and effectiveness of products may shrink." Ivan Feinseth, an analyst at
TigressFinancial Partners, said that these regulations are politically motivated and will put Indian consumers in the face of price increases. Moreover, the new regulations may have less impact on large e-commerce platforms such as Amazon and Flipkart, because they are already selling products from local merchants and can temporarily operate with meager profits or zero profits to gain market share.
"Overall, it is not good for consumers. But it is a good thing for Modi." he said, "In terms of scale, local suppliers do not have the strength to challenge."
Flipkart said that e-commerce may create millions of jobs for India, and any policy changes will have a long-term impact on the development of industries with bright prospects (e-commerce).” In a statement, the company called for: "It is important to negotiate and formulate a universal market-driven framework to promote the industry forward."
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