India’s New eCommerce Policies: What It Means for Amazon

by Matt Ellis, on March 22, 2019

High stakes, surprise twists, and bitter enemies working together — Amazon’s attempted expansion into India has certainly been dramatic, to say the least.

Under Prime Minister Narendra Modi, the Indian government changed their eCommerce policies in early 2019, upsetting the long-term plans of Amazon, Walmart and other online stores looking to break into this lucrative foreign market. But those who stand to lose the most are rallying together, even earning the support of the U.S. government.

So what’s the current situation? What does this mean for Amazon and Amazon sellers? Will India’s new policies affect you? Let’s take a deeper look.

Lost Investments for Amazon and Walmart

There are billions of dollars on the line, with some counts putting Amazon and Walmart’s investments at over $20 billion to date. These two retail giants both recently launched massive expansion campaigns into the Indian market, so these new regulations come at a bad time for them.

Amazon is already $5.5 billion in the hole from earlier investments into the southern Asian region, but had pledged another $2 billion before the turmoil. Walmart, meanwhile, is under its own pressure, having just spent $16 billion to acquire Flipkart, an Indian platform ranked 12th in 2019 online marketplaces.

So what does India’s policy changes mean to these companies? According to Reuters, a $46 billion loss.

Citing a PwC draft analysis, Reuters expects online sales to drop $800 million before the end of Q1 this year. From there it gets worse, culminating in a loss of $45.2 billion by 2022. As it stands, Amazon and Walmart combined make up 70% of India’s eCommerce sales — one reason Modi opted for policies to unseat the leaders and assist small businesses.

The writing is on the wall, too. Amazon and Walmart combined have lost thousands of their product listings. But they’re not taking this lying down. The two retail giants have joined forces to establish a lobbying group, working alongside the Office of United States Trade Representative (USTR).

Government officials from the U.S. have pleaded with the Indian government to modify their policies more favorably to the American brands, but they received only a “non-committal” response. It is unlikely that Modi will budge on the issue, as he’s preparing for a general election in May.

Policies You Need Know for Selling Online in India

So what exactly is so heinous that has Amazon and Walmart joining sides? India’s new eCommerce policies are simple, but they have far-reaching ramifications. Among the most important are:

  • eCommerce firms cannot sell products from companies they have an equity stake in.
  • eCommerce firms cannot offer exclusive deals from independent sellers.
  • Direct foreign investments can only go to marketplaces for buyers and sellers.

These changes have already started clearing out offending products from the virtual shelves. Promotions and special campaigns are subject to change, as well, as all exclusive deals are forbidden. That means these companies have to tweak the prices of much of their catalog, not to mention removing words like “exclusive” from their sales copy.

At one point, Indian policies threatened to complicate private-label merchandise, as well. However, the Department of Industrial Policy & Promotion (DIPP) has walked back on those regulations, reassuring sellers that there will be no restrictions on private-label sales.

The policies themselves originated as a cry for help from local Indian merchants, who sought government aid to compete with the likes of Amazon and Walmart. Modi has a strong and long-standing relationship with small business; among his policies already in place are state funding for startups, certain tax exemptions and special perks for women entrepreneurs.

Conclusion

If these barriers remain in place after the Indian general election, international sellers will have to think twice about expanding into India. Selling through Amazon or Flipkart will be met with new issues to resolve, but even selling independently will get more difficult — it will be hard to compete with local Indian merchants with their government advantages, and that’s the point of the policy change in the first place.

Although, at the end of the day, this likely won’t change much for everyday sellers who have a strong base outside of India — this time, it’s the billion-dollar corporations like Amazon and Walmart who are stuck with the bill.

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