The new rules could wipe out nearly half the products on Amazon.in, said Satish Meena, an analyst at Forrester Research Inc. “It’s likely to disrupt availability for customers,” he said.
That could also put Amazon’s plans to expand in food retailing into jeopardy. While India allows 100-percent foreign investment in such retail operations, the new rules bar Amazon from selling any products from entities in which it owns a stake. Last summer the government approved an Amazon proposal to invest $500 million to retail food products.
Amazon and Flipkart will have to cut back on cash-back payments and discounts. These have been a particular sore point with smaller sellers, which have accused the pair of predatory pricing practices. Behind-the-scenes and government-level lobbying is expected to continue, Singhal said.
Walmart’s and Amazon’s tactics have been controversial in a country where organized retail accounts for only about 10 percent, and the market is 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 Modi’s ruling Bharatiya Janata Party.
In response to questions, an Amazon spokeswoman said via email: “All sellers make their own independent decisions of what to list and when and we cannot comment on that.”
Flipkart said it was disappointed that the government had decided to implement the regulation changes “at such haste,” but will comply. It’s previously argued that such policies should have been created after more consultation.“Despite the significant work that is required to change our supply chains and systems, we are also confident that we will continue to serve our customers and sellers to the standards we and they are used to.”
The biggest beneficiary from the tightened rules could be Reliance, which is India’s largest private company and owns the country’s biggest brick and mortar retail chain. Recently, it has spelled out ambitious plans to delve into ecommerce by getting millions of small sellers aboard a platform it’s created alongside its Jio wireless service.
“Reliance is likely to become the largest omni-channel retailer in the next 24 months as it has nearly 300 million Jio telecom subscribers who can access a bundle of financial, education, entertainment and retail services on their phone’s Jio app,” Singhal said.
This story provided by Bloomberg News.