India’s new e-commerce laws came into effect on February 1, with Amazon and Flipkart rumoured to have pulled hundreds of thousands of products from their marketplaces to comply.
Amazon has reportedly pulled 400,000 products from its marketplace, according to a report from the New York Times. The e-commerce giant’s Indian platform has undergone rapid changes over the last few weeks as the online powerhouse prepared for changes to India’s e-commerce laws.
On February 1, new laws were passed in India placing a ban on marketplaces like Flipkart and Amazon from offering exclusive sales and from selling goods from merchants that are considered investors.
This comes after a 2016 ruling prevented marketplaces like Amazon from selling privately-owned goods on marketplaces in the region. For Amazon, this has created further headaches, as the business had previously updated its system to funnel the sale of its own products through local entities that it had shares in, meaning its products could still be sold on its platform via its partners. Now, online marketplaces operating within India will no longer be able to sell goods from businesses that it has ownership in. As a result, Amazon in India has had to pull a reported 400,000 products from its platform.
An analysis from consulting firm Technopak has suggested that Walmart-owned, Flipkart, will also need to pull inventory to remain compliant. Current estimates put the amount of non-compliant stock on its site as roughly a quarter of its total inventory.
Flipkart and Amazon had joined forces at the end of 2018, lobbying the local government for a three-month extension on the legislation change to give them a chance to update their business models accordingly. The joint effort proved unsuccessful.
The stricter regulations were first announced in December last year by Prime Minister, Narendra Modi’s government in the lead up to the general election in May. The party has reportedly introduced these new laws to appease small sellers in the region who feel threatened by global online retailers.
In mid-January, a draft analysis from global consulting business, PwC revealed that India’s prosperous e-commerce sector would take an estimated US$46 billion hit. The firm also said at the time that gross-merchandise value of goods sold online in the region could plummet by US$800 million from the current fiscal year’s expectations. Sales are also expected to drop below previous forecasts, losing US$45.2 billion between February 1, 2019, and 2022.
Satish Meena, a New Delhi-based forecast analyst at Forrester Research told The Economic Times that Amazon and Flipkart have a joint stake of more than $20 billion at risk 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.”
This comes after Walmart 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 Indian e-commerce market had been projected to be worth US$200 billion by 2026.
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