Bitter rivals, Amazon and Flipkart have teamed up to fight the Indian Government on new online retail regulations that could thwart their expansion plans in the region.
Presently, Walmart-owned Flipkart is the largest player in the Indian e-commerce market, with global goliath, Amazon, playing catch-up in an arena that’s tipped to be worth US$200 billion by 2026.
The Indian Government is pushing for online marketplaces operating within the arena to treat all vendors equally. While this is beneficial for local third-party sellers, Amazon and Flipkart, who have both invested billions of dollars into the fast-growing online space will need to rethink their business models to ensure they remain compliant with the local laws.
If the Government’s proposals, which are set to come into effect on February 1 go ahead, foreign-owned marketplaces will be unable to feature their own products and private-label inventory prominently on their sites, barring marketplaces from influencing pricing and offering large discounts. This means that featured product sections will not be able to include products sold directly by Amazon or Flipkart, and that the two marketplaces will need to be careful with how they present their local marketing campaigns.
Amazon will also have to sell any stakes it holds in overseas companies that sell goods directly to Amazon for resell onto the platform and cut any ties with favoured merchants selling via the marketplace. For instance, Amazon is currently a joint owner of Cloudtail, which operates as a seller on its global marketplace. Under the new laws, the business will be required to sell its shares in the online business. It’s believed Walmart and Flipkart will also be subject to selling off shares in companies they currently have stakes in.
According to The Economic Times, the two businesses are lobbying to extend the February 1 deadline, with Satish Meena, a New Delhi-based forecast analyst at Forrester Research saying Amazon and Flipkart have a joint stake of more than $20 billion at stake in the region. “At least another $10 billion investment will be made by these two companies in the next few years and this is the leverage they’re trying to use,” Meena explained.
Walmart originally purchased a 77 percent stake in Flipkart for US$16 billion in 2018, upping its investment to 81.3 percent later in the year. Amazon, on the other hand, failed to acquire a stake in Flipkart when shares were up for grabs but has been looking at increasing its own presence in the region to capitalise on both current and future earnings potential in what’s quickly becoming a key e-commerce market.
The proposed regulations were originally announced last week as part of a campaign to support small retailers who have been hit by the growth of online in the area. With national elections coming up in the next few months, honing in on what local merchants have referred to as predatory practices are quickly becoming a key campaign driver for politicians.