After betting big in the Indian retailing market and spending billions to create a base in the Indian market, retailing giants like Amazon and Walmart are set to face new challenges in the fastest growing emerging market in the world.
This is because the two companies are now hit with new rules in India which could potentially stop the companies from making use of their large expertise in the retailing industry and their massive size to bring down prices.
According to new regulations by unveiled by the Indian government on Wednesday, foreign companies and e-commerce platforms would be prevented from making exclusive product offers for customers such as is common in the case with smartphones.
The new regulatory framework also seeks to clamp down on a provision that would typically have allowed foreign online retailers to be able to sell their own products through other companies as their affiliate companies.
There is a fear among a large section of the world’s fastest growing major economy that the country’s economy could ultimately get dominated by a handful of US based companies and according to experts, the new regulations that are set to be brought into effect from February 1 are a reflection of the government’s measures to address such concerns and fears.
“E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field,” state the rules.
Billions have already been spent by Amazon for its India business and had in September acquired 49 per cent controlling share in a large and popular Indian supermarket chain.
One the other hand, its closest competitor in the retailing world Walmart acquired the largest Indian e-commerce platform Flipkart – which is also the major rival of Amazon in the e-retailing scenario in India, in May in a $16 billion deal for a 77 per cent controlling stake in the company.
Both the rival companies have already created strategies – similar to those that have been successful in the US, to make inroads in the Indian market and have even implemented some of them such as offering very deep discounts and offering exclusive products.
The rules were being evaluated by the company, a spokesperson for Amazon told the media. There was no comment from Flipkart.
In it has only been in recent years that the Indian government has opened up its market for foreign investment which has resulted in a spade of investments from multinational companies who want to enter the huge Indian market comprising of 1.3 billion consumers.
However, some foreign companies have started to complain about sudden rule changes and inconsistent enforcement.
The Indian government was trying to create an environment “where all traders get an equal opportunity to sell”, said Akash Gupt, a partner at PWC who advises companies on government policy.
The move has however been praised by some Indian companies.
“Marketplaces are meant for genuine, independent sellers,” Kunal Bahl, CEO of e-commerce firm Snapdeal, said on Twitter. “These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce.”
(Adapted from CNN.com)