No extension to February 1 deadline for e-commerce norms

Irving Hamilton
February 3, 2019

Amazon.com Inc. and Walmart Inc.'s grand plans for India were thrown into chaos on Friday after the country implemented new e-commerce regulations, which could cut their growth in the market by as much as half this year.

After years of protests, nationwide agitations and letters to authorities, traders' body Confederation of All India Traders (CAIT) and All India Online Vendors Association (AIOVA) have finally found a big win in their fight against leading online marketplaces Amazon and Flipkart.

New Delhi has not allowed FDI in inventory-driven models of e-commerce. According to executives at Amazon who requested anonymity, the company is mulling a number of options, including slowing the pace of its investments in India. The new rules bar online marketplaces that have foreign investments from offering products of sellers in which they hold stake.

It is Black Friday for Amazon India and Walmart-owned Flipkart as the way they conduct business has changed forever.

Amazon is in a tough spot in India, one of its largest markets outside the US. The policy also states that companies may not "directly or indirectly influence the sale price of goods and services". Smaller e-commerce firms like Snapdeal and ShopClues as well as offline retailers have also written to Commerce Ministry, urging the government to not give into pressure from U.S. companies and authorities.

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Another provision states that the inventory of a vendor will be seen as controlled by a marketplace, if over 25 per cent of the vendor's purchases are from the marketplace entity, including the latter's wholesale unit. Experts feel eBay's relaunch is among the hundreds of online marketplaces that could enter India's online market, especially ones that suffered or shut shop due to the deep discounting strategy offered by heavily funded online platforms. With the new policy in place, such practice will be barred and it is also said by Industry sources that the business structure of these e-sellers will change and compliance costs will increase. It is to be noted that both Snapdeal and Shopclues welcomed the e-commerce policy since it will bring level playing field. And so-called Alpha sellers that have sealed arrangements with Amazon and Walmart cannot sell on the websites, nor can phone makers and fashion brands sell products exclusively on either platform. Hours before the Thursday deadline, numerous items sold by seller Cloudtail were removed from Amazon's website, as the company owns indirect stake in Cloudtail.

Clothing from Indian department store chain Shopper's Stop was also no longer available, as Amazon owns 5% of the company.

Also, let's assume Flipkart had an agreement with Xiaomi to sell its smartphone when it would launch its phone "Y".

"There won't be one or two parties that make up the entirety of the Indian ecommerce opportunity and we certainly intend to have a share of it", Wenig said at an investors call on Wednesday.

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