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Amazon and Walmart (owner of Flipkart) are India’s two largest e-commerce companies. New ownership rules coming into effect in India are about to hammer their businesses. Bloomberg’s Saritha Rai reports:
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 requiring online retailers to comply with tighter new rules starting on Friday.
That means Amazon and Walmart-owned Flipkart, India’s two largest online retailers who dominate the market, won’t be able to sell the products of companies in which they have business interests, drastically reducing the categories and goods offered to shoppers.
The regulations unveiled at the end of December also ban online retailers from allowing companies to sell products exclusively on either platform. This prevents them from cutting deals to tout items like new smartphones or affordable televisions that couldn’t be sold offline or through competitors. The stringent rules also forbid online retailers from influencing prices, a step that could mean the end of heavy discounts offered to lure new buyers online.
Such strategies by global companies have been controversial in a country where organized retail accounts for only about 10 percent of a market dominated by small sellers and mom-and-pop stores. The government’s decision on the e-commerce rules comes months ahead of a crucial general election. Small traders have traditionally been part of a support base for the ruling Bharatiya Janata Party.
Read more here.
Jeremy Jones, CFA
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