Amazon and other foreign companies adhere to the new FDI norms

The new foreign direct investment rules bars companies from selling products through vendors in which they have a stake

Amazon and other foreign companies adhere to the new FDI norms
Amazon and other foreign companies adhere to the new FDI norms

Amazon and Wal-mart both have lobbied against the policy and tried to delay its implementation, however, India stood by its deadline

India modified Foreign Direct Investment (FDI) rules in December for its growing e-commerce sector. The foreign companies like Amazon.com, Wal-Mart Inc etc., are feeling the heat due to the new norms.

The second major company affected by the new rule is Wal-Mart Inc, which bought a major stake in Flipkart (Homegrown e-commerce player)

The new foreign direct investment rules bars companies from selling products through vendors in which they have a stake. The new foreign direct investment (FDI) policy which comes into effect from today, February 1, is causing a major commotion to the online retail giants – Amazon, Wal-Mart and other foreign companies.

The rule averts companies from selling products on their sites in which they hold a stake. Also, companies can’t make exclusivity deals with sellers.

Considering the change in the policy, Amazon started complying to the revised norms from Thursday midnight. A lot of products from Amazon India began to disappear including its Echo speakers, batteries and floor cleaners

Also, the products sold by Vendors like Cloudtail, Shopper’s Stop etc., are no longer available on the Amazon India, as it holds stakes in the companies.

One of the sources said, “The company has no choice, they are fulfilling a compliance requirement … customers will suffer.”

The second major company affected by the new rule is Wal-Mart Inc, which bought a major stake in Flipkart (Homegrown e-commerce player)

The e-commerce giants control their inventory with bulk buying power from affiliated vendors. They offer high discounts on a number of products and create an unfair market place

Both Amazon and Wal-Mart have taken a major bet on the Indian growing markets.  Amazon has stanched to investing $5.5 billion and Wal-Mart has spent $16 billion on Flipkart last year.

Amazon and Wal-Mart both have lobbied against the policy and tried to delay its implementation, however, India stood by its deadline.

The U.S. government has also urged India to protect the investments of the two American retailers, Reuters reported last week [1] .

However, Modi administration stood by its modification, as the govt. wants to promote small traders.

The e-commerce giants control their inventory with bulk buying power from affiliated vendors. They offer high discounts on a number of products and create an unfair market place. 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.

Amazon India told Reuters it was “committed to remaining compliant to all the laws of the land”, adding that all sellers make their own independent decisions of what to list and when [2].

Amazon Chief Financial Officer Brian Olsavsky was on a conference call with reporters following its fourth-quarter earnings announcement. In his call he asserted that the situation in India is “a bit fluid right now,” but the country remains a good long-term opportunity.

The company’s main goal is to minimize the impact of the new e-commerce rules on customers and sellers, he added.

The impact of changes on Flipkart was not clear as it did not respond immediately to a request for comment[3].

Chief Executive Kalyan Krishnamurthy said in a letter to India’s industries department in January that the rules required Flipkart to assess “all elements” of its business operations and risked causing “significant customer disruption“.

Reference:
[1] Amazon removes numerous products from India site as new e-commerce rules bite Jan 8, 2018, PGurus.com

[2] Amazon Removes Numerous Products from India Site as New e-Commerce Rules Bite
Feb 1, 2019, News18

[3] Amazon India removes numerous products including Echo speakers as new e-retail rules come into effectFeb 1, 2019,India Today

Team PGurus

We are a team of focused individuals with expertise in at least one of the following fields viz. Journalism, Technology, Economics, Politics, Sports & Business. We are factual, accurate and unbiased.

5 COMMENTS

  1. If the Government really wants to ensure generation of more jobs, all it has to do is to totally discourage (or even ban) retail Giants or Chains – whether local or foreign

    These ‘Retail Giants/Chains’ (whether local or foreign) shrink the jobs by 20:1 as compared with ‘Small Traders’.

    Government should tax these Retail Giants (whether local or foreign) heavily & force them out of business

    In the Agricultural Sector too, all these Fertilizers, Pesticides & GM/Biotech companies should be banned & thrown out by making Cow Based Natural Farming mandatory

    In the Health Sector, Government should derecognize ALLOPATHY & employ only Ayurveda, Panchgavya treatment

    If only the Trading, Agriculture & Health Sector are indigenised, India can not just generate 3 crore jobs annually but can also make available NUTRITIOUS, TOXIN-FREE FOOD along with CHEAP, EFFECTIVE HEALTH CARE to all her citizens

  2. Small traders, my FOOT. This is a rule change that will enormously benefit 1 new entrant – Mukesh Ambani. Walmart and Amazon do not seem to realize that, just as much or even more, than the US, keeping the babus well-oiled (lobbied in the US), is needed to succeed in India

    • Dear HoHum,

      Do you assume Walmart & Amazon wouldn’t have tried to OIL the Babus?!

      Not only these retail thieves tried to lobby their case individually (with Indian Government), they had even attempted to arm-twist the Indian Government into reversing the decision – by employing their Mafia-Chief, the US President

      But Modi Government as it is, is unlike the corrupt Manmohan’s – can neither be bought out nor kneeed down.

      If your statement ‘ THIS IS A RULE CHANGE THAT WILL ENORMOUSLY BENEFIT MUKESH AMBANI’ is intended to imply motives, it’s just far-fetched

      Any restrictions imposed on Foreign players are, defacto, bound to benefit the local players

  3. The other side of the spectrum is, that Indian companies or Indian retailers have no transparency regarding quality and pricing

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