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Exclusive: U.S. voices concern as India's e-commerce restrictions hit Amazon, Walmart - sources

Exclusive: U.S. voices concern as India's e-commerce restrictions hit Amazon, Walmart - sources

Postby smix » Thu Jan 24, 2019 2:49 pm

Exclusive: U.S. voices concern as India's e-commerce restrictions hit Amazon, Walmart - sources
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1PI1S6
Category: Business
Published: January 24, 2019

Description: NEW DELHI/NEW YORK (Reuters) - The United States government is concerned about India’s revised e-commerce regulations and has told officials in New Delhi the policy will hinder the Indian investment plans of Amazon.com and Walmart Inc, three sources familiar with the talks told Reuters. The tussle marks the latest in a number of U.S. protests over Indian government policies which impact American companies and comes at a time when the two countries are trying to iron out other trade irritants. In 2017, the U.S. lodged a written protest against India’s decision to cap medical device prices, which upset American companies. India’s e-commerce investment rules, which kick in from Feb. 1, ban companies from selling products via firms in which they have an equity interest and also bar them from making deals with sellers to sell exclusively on their platforms. The policy has dealt a blow to Walmart, which just last year invested $16 billion in buying 77 percent of India’s Flipkart, and Amazon, as it would force them to change their business structures in the country and raise their operational costs. “There is a very strong undercurrent as to how this should be made a bilateral issue,” said a Washington-based industry source aware of the companies’ thinking. “This has gone way beyond being a local (India) tussle.” A U.S. government official earlier this month told Indian officials to protect Walmart and Flipkart’s investments in the country, an Indian trade ministry official told Reuters. The U.S. government cited “good relations” between the two countries and stressed that American companies should be given concessions in the larger interest of bilateral trade, but India gave a “non-committal” response, the source added. But Indian Prime Minister Narendra Modi is unlikely to delay the revised rules or amend them in any meaningful way as he is seeking the support of the tens of millions of small retailers and traders in India ahead of a general election that must be held by May. The small firms see Walmart and Amazon as a threat to their businesses. An Indian industry source said Walmart, Amazon and lobbying groups were coordinating efforts with the Office of the United States Trade Representative (USTR) and the local embassy to express their discontent about the policy. The USTR did not respond to a request for comment. The U.S. Embassy in New Delhi, and Indian trade ministry spokeswoman Monideepa Mukherjee, declined to comment. Asked about the Indian policy’s implications, Walmart spokesman Greg Hitt said: “We certainly, as you would expect, have engaged the (United States) administration on this issue.” He declined to share further details. Amazon India said it was committed to complying with local laws but it needed “adequate time to understand” the policy.
GLOBAL VS LOCAL
Amazon and Walmart have both made bold bets to tap India’s booming e-commerce market, which Morgan Stanley had estimated, before the latest government move would grow 30 percent a year to $200 billion in the 10 years up to 2027. The companies have targeted a growing population of tech-savvy shoppers in India, luring them with deep discounts on everything from dishwashers to smartphones. India’s small traders and shopkeepers had for years complained that e-commerce companies were engaging in predatory pricing and hurting the businesses of brick-and-mortar retailers. They alleged that the online retailers used their control over inventory from their affiliates to create an unfair marketplace that allowed them to sell some products at lower prices. Such arrangements would be barred under the new policy. “We are disappointed more than surprised. It makes it harder to plan things,” a U.S.-based Walmart source told Reuters. “It is a serious issue. We are doing our best to work with Indian authorities and trying to explain why this is bad for business.” The Confederation of All India Traders, which has supported tougher scrutiny of large e-commerce players, said the companies were acting “desperate” by pressurizing the Indian government. “Any deferment or change (in the policy) will adversely affect millions of small businesses,” said the group’s secretary general, Praveen Khandelwal.
POLITICS, DEADLINE RISK
Both Walmart-owned Flipkart and Amazon have requested the government to delay implementation of the policy, but India is unlikely to relent. Indian officials have told Reuters no relief was likely as the policy was seen helping the small trader community, who form a critical voter base for Modi. “The idea is just to win over the trading community ahead of elections and on that point the government will not budge from the deadline,” a second Indian trade ministry official said. At stake are big ticket investments. When Walmart bought Flipkart last year, it said the decision underscored its “long-term commitment to India”. Amazon has committed to investing $5.5 billion in the country and Modi has in recent years met its founder Jeff Bezos multiple times. In 2017, Bezos said he was “excited to keep investing and growing” in the country. That investment climate has turned sour with sudden policy changes. Prasanto Roy, a New Delhi-based consultant who closely tracks India’s technology policy landscape, said the government should provide stable policies to attract investment. “You can’t change policies overnight without consultation and tell companies who have invested billions to go fly a kite,” Roy said.



Exclusive: Hindu group RSS urges India's Modi to resist U.S. push to ease e-commerce curbs
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1PJ147
Category: Politics
Published: January 25, 2019

Description: NEW DELHI (Reuters) - A Hindu nationalist group close to Prime Minister Narendra Modi’s party has urged him to resist pressure from the United States and not defer new regulations for the e-commerce sector, according to a letter seen by Reuters. The economic wing of the group, Rashtriya Swayamsevak Sangh (RSS), which is the fountainhead of the ruling party, has written to Modi saying that changing the policy implementation date, under pressure from Washington, will hurt 130 million small Indian entrepreneurs. “There is no need to buckle under these pressures. India must continue to chart the way best for itself and the entrepreneurs,” the Swadeshi Jagran Manch said in its letter, which was reviewed by Reuters.

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The new rules, to be implemented from Feb. 1, will deal a blow to Walmart Inc and Amazon.com’s ambitions in the country. They mandate that e-commerce companies will not be allowed to sell products from firms in which they have an equity interest. Reuters reported on Thursday the United States government had told Indian officials the new rules will hinder the investment plans of the two companies. The rules, which will force the companies to change their business structures and raise operational costs, have sparked an extensive lobbying effort from both Amazon and Walmart, which last year invested $16 billion in Indian e-commerce company Flipkart. Both Amazon and Walmart have sought an extension of the Feb. 1 deadline, but government sources have said that was unlikely to happen as Modi needs millions of traders by his side in an upcoming national election due by May. On Friday, the Confederation of All India Traders, which has supported tougher scrutiny of large e-commerce players, said “the entire trading community will vote against the government if they extend the deadline”. The e-commerce spat is the latest in a number of disputes over trade and investment relations between India and the United States. Walmart spokesman Greg Hitt told Reuters this week the company had “engaged the (United States) administration on this issue”. The RSS has long advocated self-reliance and opposed the opening up of the Indian economy to foreign players.

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Small Indian retailers have alleged that e-commerce companies use their control over inventory from their affiliates to create an unfair marketplace that allows them to sell some products at lower prices, which hurts the businesses of brick-and-mortar retailers. Such arrangements would be barred under the new policy. In front-page advertisements in newspapers last week, Walmart-owned Flipkart highlighted how the platform had helped transform local struggling businesses selling badminton racquets and sarees, a traditional dress.



New e-commerce rules jolt Amazon.com in India as products vanish
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1PP2OO
Category: Business
Published: January 31, 2019

Description: NEW DELHI/MUMBAI (Reuters) - India’s revised e-commerce rules caused widespread disruption on Amazon’s India website when they kicked in on Friday, forcing the company to take down its key grocery service and remove a wide range of products such as sunglasses and floor cleaners. The products began to disappear from Amazon India late on Thursday as it began complying with the regulations before a midnight deadline, two sources with direct knowledge of the matter told Reuters. In December, India modified foreign direct investment rules for its burgeoning e-commerce sector, which has drawn major bets from not only Amazon.com but also the likes of Walmart Inc, which last year bought a majority stake in homegrown e-commerce player Flipkart. India’s new e-commerce investment rules bar online retailers from selling products via vendors in which they have an equity interest, and also from making deals with sellers to sell exclusively on their platforms. Numerous items sold by Amazon vendors such as Cloudtail, in which Amazon holds an indirect equity stake, were no longer available on its India site. Amazon Pantry, a grocery service primarily managed by company affiliates, was also discontinued, though grocery products could be purchased individually. “Pantry is completely empty, how I am suppose to grocery shop,” Twitter user Pamela wrote on the social network. “Whatever government rules are, (I) don’t care, you guys fix it, I need to shop.” Amazon, which saw record sales and profit during the holiday season, has forecast first-quarter sales below Wall Street estimates due to the uncertainty in India - one of its key growth markets. The situation in India is “a bit fluid right now,” but the country remains a good long-term opportunity, Amazon Chief Financial Officer Brian Olsavsky said. The company’s main goal was to minimize the impact of the new rules on customers and sellers, he added. Flipkart CEO Kalyan Krishnamurthy warned last month that it faced “significant customer disruption” if the new rules were implemented from Feb. 1. On Friday, the company said it was disappointed the government acted in “haste”, but assured compliance. “We are committed to doing everything we can to be compliant with the new rules,” Flipkart India executive Rajneesh Kumar said in a statement, without explaining how the website was impacted.
POLITICS, INVESTOR SETBACK
The new policy was announced after complaints from small Indian traders who said the e-commerce giants used their control over inventory from affiliated vendors to create an unfair marketplace where they could offer discounts. Such arrangements will now be barred. Both Amazon and Walmart unsuccessfully lobbied against the latest rules and pushed for a delay in their implementation. The U.S. government too urged India to protect the investments of the two retailers, Reuters reported last week. But Indian Prime Minister Narendra Modi’s administration stood firm as the move was widely seen as one to appease small traders in the run-up to a general election due by May. Industry sources have said the new rules will dent foreign investor sentiment and force the big online retailers to change their business structures, raising compliance costs. “The company has no choice as they are fulfilling a compliance requirement, the customers will suffer,” said one of the sources. “It is very upsetting for foreign investors.” Both companies have bet heavily on India being a big growth driver: Amazon has committed to investing $5.5 billion there, while Walmart last year spent $16 billion on Flipkart. Amazon’s own range of Presto-branded home cleaning goods and other Amazon Basics products such as chargers and batteries vanished from its website late on Thursday. Clothing from Indian department store chain Shopper’s Stop was also no longer available, as Amazon owns 5 percent of the company. The Confederation of All India Traders (CAIT), which supported tougher scrutiny of large e-commerce players, said the removal of products by Amazon was a step in the “right direction”. Exclusive deals with sellers, in compliance with the revised rules, will also be discontinued on Amazon India, the two sources said. It was unclear how long the disruption will last. On Friday, Amazon’s own range of Echo smart speakers, which were earlier removed as they were sold by a company affiliate, returned for sale via other sellers on the platform. However, buyers would now need to wait for up to 36 days to get some of the speakers delivered even under Amazon’s fast-delivery Prime service, which often delivers goods in a day or two.



Walmart, Amazon scrambling to comply with India's new e-commerce rules
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1PP1PN
Category: Business
Published: January 31, 2019

Description: MUMBAI (Reuters) - Walmart Inc-owned Flipkart and Amazon.com Inc’s Indian unit are rushing to rejig ownership structures and rework some key vendor relationships, as they seek to comply with new Indian e-commerce curbs without disrupting their businesses. In late December, India modified rules around foreign direct investment (FDI) in e-commerce, creating additional hurdles for the retail giants. The rules, which kick in on Friday, do not allow e-commerce sites to “exercise ownership or control over the inventory” of sellers. India does not allow foreign investors to control and market their own inventory on their e-commerce platforms. They are only allowed to operate marketplace platforms where others sell goods to retail consumers. Traders and rivals say companies such as Amazon and Flipkart have been violating the spirit of these rules by creating proxy sellers or vendors in which they have direct or indirect stakes, allowing firms to give deep discounts that upset off-line trade. The All India Online Vendors Association, a group of about 3,500 online sellers, has accused both Flipkart and Amazon of using their dominant position to favour selected sellers. Amazon and Flipkart deny the accusations. Both Amazon and Flipkart sought more time to comply with the new rules. But India said on Thursday, it had, after “due consideration” decided not to extend beyond Feb. 1 the deadline for the implementation of the modified FDI norms. In a letter to India’s industries department earlier this month, Flipkart Chief Executive Kalyan Krishnamurthy said the rules required it to assess “all elements” of its business operations, a source told Reuters previously. Flipkart and Amazon did not respond to requests for comment on their plans for complying with the new regulations.
EQUITY STAKES
The new rules, meant to close loopholes in the regulations, state that if any seller purchases more than 25 percent of its inventory from the wholesale units or other group companies of an e-commerce firm that runs an online marketplace, then that vendor’s inventory will be deemed to be controlled by the e-commerce company. That could disrupt the models of Amazon and Flipkart, whose wholesale units buy products in bulk and sell to thousands of vendors on their platform, who in turn sell to consumers. Flipkart was likely to create a so-called “middle layer” firm - in which it would have less than a 25 percent shareholding - between its wholesale arm and vendors on its marketplace, two sources familiar with the matter told Reuters. This company, which would be classified as a non-group company under Indian law, would be able to freely sell to vendors without the 25 percent sourcing restriction, the sources added. Another rule blocks entities in which an e-commerce firm, or any of its group companies, owns a stake from selling its products on that firm’s marketplace. This creates a barrier for India’s Shopper’s Stop to sell on Amazon India, as Amazon’s investment arm has a minority stake in the department store chain. Cloudtail and Appario, among the top sellers on Amazon India, could also face similar restrictions, because Amazon owns minority stakes in their parent firms. “By the letter of the regulation it will not be considered to be an entity in which Amazon has an equity stake, but if the government is wanting to implement the spirit of this rule they might say this doesn’t cut it,” one of the sources said. E-commerce players may also be forced to give up the word “exclusive” when they launch products such as smartphones on their platforms, as the rules mandate that an online retailer cannot push vendors to “sell any product exclusively on its platform only”. Contracts between a brand and e-commerce firms would be reworded to say a brand would not sell to a direct rival, giving it freedom to sell elsewhere, one of the sources said.



Breakingviews - Amazon and Walmart get caught in India’s web
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1PQ3IN
Category: Business
Published: February 1, 2019

Description: MUMBAI (Reuters Breakingviews) - Online shopping baskets in India are about to get lighter. Amazon and Walmart will be limited to operating a marketplace and prevented from acting as retailers under stricter rules which came into effect on Friday, resulting in products disappearing from the virtual shelves. Their miscalculation on the direction of policy could be costly. New Delhi is clamping down on a long-standing policy to keep foreign investment out of big retail.

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It means Walmart, which recently ploughed $16 billion into India’s Flipkart, and Amazon can no longer sell products from companies in which they own a stake, nor push vendors to hawk goods exclusively through their online services. They must also ensure they account for no more than a quarter of any merchant’s purchases. Amazon and Walmart, whose combined market values are $1.1 trillion, will suffer because they have been adhering to the letter rather than the spirit of India’s rules. Through complex structures, they replicate some benefits of an inventory-led business model, leveraging scale to deliver goods to consumers faster and cheaper. Cash rewards are often thrown in, too. For example, Amazon owns a minority stake in the parent company of Cloudtail, which is backed by Infosys co-founder and billionaire Narayana Murthy. It is one of Amazon’s biggest vendors. Under the latest rules, Cloudtail will not be allowed to sell on Amazon. Nor would Amazon’s own fledgling food business. As a result of the changes, online sales could fall by $46 billion by 2022, according to a draft analysis by consultancy PwC seen by Reuters. The overhaul also creates room for local operators to dominate, as is the case in China.

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Indian billionaire Mukesh Ambani, for one, will gain an edge as he attempts to turn his $109 billion Reliance Industries into a retail and media empire akin to the one built by Jeff Bezos. New Delhi only belatedly has decided to enforce its original intended policy aims. In their eagerness to grab market share, however, Amazon and Walmart too lightly dismissed the risk it would happen. Ahead of an upcoming general election, politicians will be counting on votes from the country’s millions of appeased shopkeepers. The U.S. retailers can only elect how they want to proceed in India from here.



Amazon changes business structures in India to bring big seller back: sources
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1PW0K5
Category: Business
Published: February 7, 2019

Description: NEW DELHI (Reuters) - One of the biggest sellers on Amazon.com Inc’s India website has returned after the online retail giant changed its business structures to comply with new federal e-commerce curbs that took effect last week, two sources told Reuters. India’s modified foreign direct investment rules that kicked in on Feb. 1, prevent companies such as Amazon from selling products from vendors where they, or their group companies, have equity holdings. Amazon was forced to remove hundreds of thousands of items sold by top vendors Cloudtail and Appario as it indirectly held 49 percent equity stakes in both firms. But on Thursday Cloudtail had returned with more than 300,000 products listed on Amazon, after the U.S. e-commerce firm cut its indirect holding to 24 percent, one of the sources with knowledge of the matter told Reuters. The stake was bought by the majority holders, Catamaran Ventures, the source said. “We have no equity participation in any seller company on our marketplace,” Amazon said in a statement, without sharing details of the changes in its indirect holding of Cloudtail. Catamaran, an investment firm launched by Infosys founder N.R. Narayana Murthy, said it had made “required changes” to comply with the rules, but did not elaborate. Amazon is working on a similar restructuring for the other big seller, Appario, a second source said. The sources declined to be named as they were not authorized to discuss the same with media. The new rules were introduced after complaints from small Indian traders who said Amazon and Walmart-owned online retailer Flipkart used their control over inventory from affiliated vendors to unfairly offer discounts. The Confederation of All India Traders (CAIT), which has pushed for tougher scrutiny of e-commerce players, on Thursday alleged Amazon’s latest move was a circumvention of the new rules. The group would ask India’s industries department to clarify that online retailers should not hold direct or indirect stakes in their vendors, CAIT Secretary General Praveen Khandelwal told Reuters. The industries department did not immediately respond to a request for comment. Amazon and Walmart Inc had unsuccessfully lobbied against the latest rules and pushed for a delay in their implementation. While product listings on Amazon have been disrupted, Flipkart has been less impacted as it had no equity holdings in its vendors. Flipkart’s sellers were exhausting inventory from before the rules kicked in, and the company was working with its partners to ensure they complied with new norms when they sold new inventory on the platform, a person with direct knowledge of the matter said. Flipkart declined to comment.



Exclusive: U.S. considers withdrawal of zero tariffs for India - sources
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1PX0ZM
Category: Politics
Published: February 8, 2019

Description: NEW DELHI (Reuters) - India could lose a vital U.S. trade concession, under which it enjoys zero tariffs on $5.6 billion of exports to the United States, amid a widening dispute over its trade and investment policies, people with close knowledge of the matter said. A move to withdraw the Generalised System of Preferences (GSP) from India, the world’s largest beneficiary of a scheme that has been in force since the 1970s, would be the strongest punitive action since President Donald Trump took office in 2017 vowing to reduce the U.S. deficit with large economies. Trump has repeatedly called out India for its high tariffs.

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Indian Prime Minister Narendra Modi has courted foreign investment as part of his Make-in-India campaign to turn India into a manufacturing hub and deliver jobs to the millions of youth entering the workforce. Trump, for his part, has pushed for U.S. manufacturing to return home as part of his Make America Great Again campaign. The trigger for the latest downturn in trade ties was India’s new rules on e-commerce that restrict the way Amazon.com Inc and Walmart-backed Flipkart do business in a rapidly growing online market set to touch $200 billion by 2027. That, coming on top of a drive to force global card payments companies such as Mastercard and Visa to move their data to India and the imposition of higher tariffs on electronic products and smartphones, left a broader trade package the two sides were working on through last year in tatters. The GSP was tied to the trade package and since that deal had slipped further away, the United States was considering withdrawing or scaling back the preferential arrangement, two sources said, speaking on condition of anonymity because of the sensitivity of the matter. The U.S. Trade Representative (USTR) was completing a review of India’s status as a GSP beneficiary and an announcement was expected over the next two weeks, the sources said. “(The two sides) were trying to sort out the trade package, but were not able to actually finish the deal. In the meantime these other things, data localization and e-commerce, have come along,” one of the sources said. “In a sense its like someone has rained on the parade.” India and the United States have developed close political and security ties. But bilateral trade, which stood at $126 billion in 2017, is widely seen to be performing at nearly a quarter of its potential. U.S. Commerce Secretary Wilbur Ross is due in New Delhi next week where he is expected to raise concerns about the e-commerce policy and data localization, officials said.
VARIOUS NEW POLICIES
New Indian rules announced in December for the e-commerce sector banned companies such as Amazon and Flipkart from striking exclusive deals with sellers, restricted their ability to offer discounts and barred them from selling products via vendors in which they have an equity interest. The move disrupted product listings on Amazon’s India website and forced it to change its business structures. Amazon and Walmart, as well as the U.S. government, had lobbied against the move, Reuters reported earlier. The new rules, coming ahead of a general election, were seen as a bid by Modi to placate small traders, who had for years complained about business practices of large e-commerce players. They form a key voter base for Modi who is facing a tightening election in the next few months. The idea of the policy was to foster healthy competition and promote India’s e-commerce, an Indian government official involved in trade issues said, defending the curbs on the big firms. But companies disagree and decry such sudden policy changes. “These types of actions can really put a negative view on India as an investment destination,” one of the sources said. India last year also announced proposals to force foreign companies to store more of their user data locally, in a bid to better conduct legal investigations. U.S. lobby groups had voiced concerns about those proposals too, saying they made it difficult for companies to do business in the country.
POSSIBLE INDIA SETBACK
If the United States eliminates duty-free access for about 2,000 Indian product lines, it will mostly hurt small businesses such as jewelry, said one of the sources. The number of goods qualifying for preferential treatment could be reduced, or the whole program could be withdrawn. There was no response to a request for comment from the USTR or the U.S. Embassy. India’s trade ministry also did not answer questions emailed to them about trade differences with the United States. But an Indian government official briefed on the trade discussions said the trade package under which the two sides were negotiating better access to each other’s farm and dairy markets was unlikely until the elections in India this spring. Talks on U.S. demands to relax India’s decision to cap prices of medical devices made in the United States had also got stuck, the official said. “The list of grievances is getting bigger, now with e-commerce added in,” he said. India fears Trump may demand a free trade agreement if both sides fail to reach a compromise on the trade package. Such a pact would mean zero tariffs for U.S. goods arriving in India, further threatening local industry.



Breakingviews - India's tech rules are taking on a Chinese quality
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1Q0062
Category: Politics
Published: February 11, 2019

Description: MUMBAI (Reuters Breakingviews) - For global technology giants looking for growth, India was supposed to be an easier hunting ground than China. But New Delhi’s plan to compel the likes of Facebook and Alphabet’s Google to actively police user-generated content threatens free speech. Coming after edicts that limit foreign giants Amazon and Walmart in e-commerce, the rules suggest India may not be a much easier bet than the People’s Republic.

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The proposal, made by the technology ministry in December, addresses a real problem. It’s an effort to curb the spread of misinformation after mob violence linked to messages circulated on Facebook-owned WhatsApp, which counts India as its largest market. The draft demands companies pre-screen user content, remove unlawful material within 24 hours and provide a way to trace the user. India is also asking any content provider with more than 5 million users to be locally incorporated. If enacted, the policy would reduce various tax benefits and liability protections that consumer-facing tech companies enjoy as a result of being based in the United States, and elsewhere. An alarmingly broad definition of what constitutes “unlawful content” also leaves plenty of scope for self- censorship and enforced censorship in the run-up to a general election that must be held by May. A lobby group which includes the big U.S. names has criticised the plan, ratcheting up trade tensions between the two countries. Local companies, including billionaire Mukesh Ambani’s Reliance Jio and social network Sharechat are less concerned with the interference. Certainly, India is not the first to seek to curb the internet and use it on their own terms, benefitting domestic players in the process. But it’s a blow for tech behemoths who viewed the country of 1.3 billion people as a way to compensate for problems they have faced in larger and much richer China, which has, for years, banned the services of Facebook and YouTube owner-Google. India’s sheer size and potential allow it to make some demands. But companies like Google have faced significant backlash at home when they have attempted to bow to the demands of authoritarian regimes. Now that India has almost half a billion internet users, foreign companies may find that prize comes with strings attached.



India proposes new e-commerce regulations with focus on data rules
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1QC0LO
Category: Politics
Published: February 3, 2019

Description: NEW DELHI/MUMBAI (Reuters) - India outlined a new draft policy for its burgeoning e-commerce sector on Saturday, focusing on data localization, improved privacy safeguards and measures to combat the sale of counterfeit products. The proposed overhaul, which would likely increase operating costs for the sector, comes two months after the country modified regulations governing foreign direct investment in e-commerce. That forced retail giants Amazon.com Inc and Walmart-owned Flipkart to restructure their Indian operations, and the latest reforms spell further upheaval. “In the future, economic activity is likely to follow data,” the widely expected draft policy document said. “It is hence vital that we retain control of data to ensure job creation within India”. The new rules call for the housing of more data centers and server farms locally, amid a broader push for data localization by the South Asian nation, which is one of the world’s fastest-growing online markets. India’s central bank in 2018 forced payments providers such as Mastercard and Visa Inc to store Indian users’ data locally. “Steps will be taken to develop capacity for data storage in India,” the draft e-commerce rules said. “A period of three years would be given to allow industry to adjust to the data storage requirement.” Flipkart and Amazon said they were going through the draft rules and will share their inputs with the government. The proposed rules also seek the creation of a “legal and technological framework” that can help impose restrictions on the cross-border flow of data generated by users, moves that may affect not just e-commerce platforms but also social media firms such as Alphabet Inc’s Google and rival Facebook Inc. India also plans to mandate all e-commerce firms to provide access to their data stored abroad whenever official requests are made. The rules, which come at a time New Delhi is working on a broader data privacy law, also forbid companies from sharing data stored abroad with other businesses even with user consent. Other proposals include mandating all e-commerce websites or apps operating in India to have a locally registered business entity, and increasing liability of e-commerce players to ensure products sold on their platforms are not counterfeit or pirated. “Lot of issues covered, bold decisions,” the All India Online Vendors Association, which represents more than 3,500 online sellers, said in a tweet. New Delhi has invited comments on the proposed rules by March 9, after which the rules are likely to be formalized.



Amazon, Walmart's Flipkart unlikely to respond to key queries in India antitrust study: sources
Reuters

URL: https://www.reuters.com/article/us-indi ... SKCN1SY17K
Category: Politics
Published: May 28, 2019

Description: NEW DELHI (Reuters) - Amazon.com Inc and Walmart Inc’s Flipkart are unlikely to fully participate in an Indian antitrust body’s study of the e-commerce sector for fear of revealing trade secrets, two people with direct knowledge of the matter said. The Competition Commission of India (CCI) is engaged in what it describes as a “fact-finding exercise” aimed at better understanding the e-commerce sector, showed a document distributed to several e-commerce firms and reviewed by Reuters. The CCI document features 88 questions over 12 pages requesting recipients volunteer pricing strategies, product information and the identities of their biggest-selling vendors. Amazon and Flipkart are among India’s largest e-commerce companies so their participation in any such survey could carry significant weight. Yet the pair are unlikely to answer questions in full as doing so would involve disclosing commercially sensitive information, the two people told Reuters. “This survey is very detailed,” said one of the people, who declined to be identified as they were not authorized to speak publicly on the matter. “Companies are worried because these are competitive, confidential things which are business critical.” Amazon, Flipkart and the CCI did not respond to Reuters requests for comment. CCI’s study comes about four months after the government implemented new rules regulating foreign investment in e-commerce, including barring the sale of products on their platforms from vendors in which they have an equity interest. The rules saw scores of products vanish from Amazon’s Indian website overnight, and shocked Walmart which just months earlier had bought the majority of Flipkart for $16 billion in the U.S. retailer’s biggest-ever acquisition. U.S. officials and e-commerce companies have protested the rules, which were widely seen as aimed at winning the support of small traders ahead of a general election. The incumbent government won the election this month by a landslide. To better understand the e-commerce sector, the CCI in its document asks companies basic details such as the number of employees, but asks online marketplace operators more sensitive questions such as how they charge vendors on their platforms. It also asks questions regarding contractual agreements struck between e-commerce companies and vendors. There is no indication of compulsory participation in the survey, with the CCI in the document saying it “does not form a part of any investigation and/or inquiry in any of the proceedings pending” before the watchdog.



Walmart faces major India test over unit Flipkart's legal spat with startup
Reuters

URL: https://www.reuters.com/article/us-walm ... SKCN1T51D9
Category: Politics
Published: June 4, 2019

Description: NEW DELHI (Reuters) - An Indian startup’s legal challenge against a Walmart unit claiming losses caused by sharp discounting of its products is winning support from other online sellers, in what is shaping as a key test of how the giant retailer operates in the country. The legal tussle between GOQii, a seller of smartwatch-type health devices, and Walmart’s Flipkart unit, comes just months after India imposed stricter rules for foreign investment in e-commerce that were aimed at deterring such sharp discounts. GOQii sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70% to the retail price, much more than the two sides had agreed to, legal documents related to the case showed. The case will next be heard on Friday. Flipkart has denied any wrongdoing, saying it was not responsible for any discounts which are only determined by third-party companies which sell on the e-commerce website. The legal spat has brought to the fore concerns long raised by small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party. They say companies such as Flipkart and Amazon.com deeply discount some products by burning billions of dollars to lure customers onto their sites in the expectation that they will also buy other goods. “It will set a precedent if the final decision goes against Flipkart for predatory pricing,” said Salman Waris, a partner at TechLegis Advocates & Solicitors. “Small traders’ associations and other startups may take other marketplaces adopting deep discounting strategy to court.” The GOQii case could snowball. The All India Online Vendors Association told Reuters in a statement it plans to file a plea to join GOQii’s case against Flipkart on behalf of 3,500 online sellers it represents. Flipkart said in a statement it takes legal compliance seriously and was compliant with Indian law. “We are engaged with the supplier to come to a swift resolution,” it said. With a 19 percent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC in December showed. The market is dominated by China’s Xiaomi, with Samsung a small player.
GOQII VS FLIPKART
GOQii’s dispute with Flipkart centers around two of its wearables devices that allow users to track exercise measurements, such as the number of steps walked, or heart rates. GOQii’s Chief Executive Vishal Gondal told Reuters the firm signed an agreement in September with a Flipkart unit, allowing it to sell the two GOQii devices at a price not below 1,999 rupees and 1,499 rupees, after discounts. But GOQii last month found Flipkart’s website showed the devices on sale for 999 rupees and 699 rupees. The company wrote to Flipkart, saying it was giving “unauthorized” discounts and resorting to “predatory pricing”, violating the agreement, its legal notice showed. Flipkart was just a business-to-business wholesale venture which sells good to re-sellers, its law firm, Shardul Amarchand Mangaldas, said in its response that was seen by Reuters. That’s central to how Flipkart operates - as India prohibits foreign e-commerce firms from stocking and selling their own inventory on its websites, their wholesale units purchase goods in bulk and sell them to re-sellers. Those re-sellers use Flipkart’s own website to sell some of those goods to customers. Flipkart does not control or influence prices which were determined by such re-sellers, the law firm said, adding that it reserves “the right to institute actions for defamation, both civil and criminal”. GOQii’s Gondal, however, said he was in possession of WhatsApp messages and e-mails from Flipkart’s employees that show the company was aware and involved in discounting products on its website. He declined to share those with Reuters, citing the ongoing court case. Gondal said about 500,000 device orders were canceled after GOQii’s other customers accused the startup of cheating them when they saw cheaper prices on Flipkart. The company was also assessing monetary damages it plans to seek from court. “It’s a matter of survival. It’s not easy to take on a multi-billion-dollar company,” Gondal said. In interim relief, the court has ordered the sellers, who are also party to the case, to remove the wearable devices from the Flipkart platform.
WALMART’S STRUGGLES
India’s new foreign investment rules introduced in February were troubling for Flipkart and Amazon as they barred companies from selling products via firms in which they have an equity interest and stopped them from pushing their sellers to sell exclusively on their websites. The policy was aimed at deterring deep discounts and helping small traders, but it shocked Walmart as it had just months ago closed its biggest deal by investing $16 billion in Flipkart. Swadeshi Jagran Manch (SJM), the economic wing of the Rashtriya Swayamsevak Sangh, the ideological parent of Modi’s ruling party, said on Tuesday the government must investigate online discounts. “We are standing behind any small trader, businesses who suffer online,” said Ashwani Mahajan, SJM’s co-convenor, adding it would discuss GOQii’s legal case against Flipkart with government officials.
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Amazon and Flipkart pull 100,000s of products to comply with new Indian law

Postby smix » Fri Feb 01, 2019 3:21 pm

Amazon and Flipkart pull 100,000s of products to comply with new Indian law
TechCrunch

URL: https://techcrunch.com/2019/02/01/amazo ... yptr=yahoo
Category: Business
Published: February 1, 2019

Description: Amazon has been forced to pull an estimated 400,000 products in India after new regulation limiting e-commerce businesses went into force in the country today. First announced at the end of 2018, the new regulation imposes a ban on exclusive sales, prevents retailers from selling products on platforms they count as investors, and it applies restrictions on discounts and cashback promotions. That’s hugely problematic for Amazon and Flipkart, its rival that’s owned by Walmart following a $16 billion investment last year. After a 2016 ruling prevented it from owning inventory, Amazon restricted its system so that its own products were offered by entities that it jointly owned with local partners. However, the newest regulation forbids it from working with organizations that it has ownership of, hence it is estimated to have pulled as many as 400,000 products from sale in India, according to a New York Times report. The same report suggests that Flipkart could pull as many as one-quarter of its products in order to comply with the rule, according to analysis from consulting firm Technopak. Flipkart and Amazon have been unsuccessful with efforts to get a three-month extension to the rules, Bloomberg reported, hence their respective catalogs look very much more sparse today. Online commerce in the country is tipped to surpass $100 billion per year by 2022, up from $35 billion today, as increasing numbers of Indian citizens come online, according to a report co-authored by PwC. But it looks like 2019 could deliver a major curveball.
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Re: Amazon and Walmart get caught in India’s web

Postby samurai » Thu Feb 07, 2019 10:53 pm


Meanwhile, in Bombay

modi-flipkart.jpg

modi devo bhava

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Morgan Stanley warns Walmart may exit Flipkart post new FDI rules

Postby smix » Fri Feb 08, 2019 3:55 am

Morgan Stanley warns Walmart may exit Flipkart post new FDI rules
Economic Times

URL: https://economictimes.indiatimes.com/in ... 843595.cms
Category: Business
Published: February 5, 2019

Description: As new FDI rules kick in, Walmart may abandon Flipkart if it isn't able to see a long-term path to profitability.

flipped-kart.jpg

Wall Street biggie, Morgan Stanley said Walmart may exit Flipkart in a similar move to what Amazon did in China if the retail giant can’t see a long-term path to profitability. The brokerage firm said in a report dated February 4 that “an exit (by Walmart) is likely, and not completely out of the question, with the Indian e-commerce market becoming more complicated”. The report comes in the wake of the new Foreign Direct Investment (FDI) rules for the India’s ecommerce sector which were implemented by the government on February 1. The government’s Press Note 2 issued in December last year bars online marketplaces and their group companies from owning their vendors and prohibits them from controlling the inventory sold on their platforms. “There is a precedent for an exit as Amazon retreated from China in late 2017 aer seeing that the model no longer worked for them,” the Morgan Stanley report titled ‘Assessing Flipkart Risk to Walmart EPS’ said. Morgan Stanley said Flipkart may need to remove approximately 25% of its products from its site in light of the new rules. Smartphones and electronics would feel the greatest immediate impact because of the necessary changes to supply chains and existing exclusivity deals, the brokerage said. “We estimate that Flipkart derives 50% of its revenue from this category, meaning Flipkart could face meaningful disruption and top-line pressure in the near term,” it said. Historically, Flipkart’s gross sales have been driven by smartphone and electronic sales which are high-priced. Responding to ET’s query, a Walmart spokesperson said: “Despite the recent changes in regulations, we remain optimistic about the ecommerce opportunity in India given the size of the market, the low penetration of ecommerce in the retail channel and the pace at which it is growing. As Walmart scales in India, the company will continue to partner to create sustained economic growth across agriculture, food and retail. Future investments will support national initiatives and will bring sustainable benefits to the country.” Amazon and Flipkart have been the most impacted online marketplaces and have seen a drop of around 25-35% in sales aer having to rejig their seller entities where they held an equity stake, as ET reported earlier in the week. Amazon’s two top sellers — Cloudtail and Appario Retail — removed products sold by them aer the new guidelines kicked in on February 1 as they were joint ventures formed by the American online retail behemoth. “Walmart is financially and strategically invested in India via Flipkart. We do not think it is considering walking away from its investment at this stage. It is still too early to say how the ecommerce landscape in India may change, " the report stated. The new rules are intended to foster a more level playing field between small and large vendors on e-commerce marketplaces. They would negatively aect both Flipkart and Amazon given the vast majority of their sales (reportedly 70-80%) are said to come from "preferred sellers" which are companies that Flipkart and Amazon have equity stakes in or do a significant amount of business-to-business transactions with and this practice would be disallowed under the new rules. Flipkart and Amazon also oer a significant amount of exclusive deals, particularly in smartphones, which will be disallowed under new rule. Last year, Walmart Inc picked up 77% stake in India’s largest online retailer Flipkart for $16 billion. The US retail giant pumped another $2 billion into Flipkart, pegging its value at $22 billion. Morgan Stanley said the market's initial reaction to Walmart’s purchase of Flipkart was negative.“As investors gained comfort in Flipkart's ability to maintain rapid top-line growth while not incurring greater than expected losses, this discount largely dissipated,” the brokerage said. “Now that Flipkart's losses will likely rise, it once again becomes a bigger part of the Walmart investment narrative.” The report further added that the total e-commerce sales in India could decelerate from 2018’s run rate of 50% in India as Flipkart and Amazon are forced to reduce purchases from a large set of sellers and eliminate exclusive deals. “Flipkart may need to remove 25% of its products from its site. In addition, our India Internet team believes smartphones and electronics would feel the greatest immediate impact.”
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Govt accuses Amazon, Flipkart of violating e-comm FDI rules

Postby smix » Sat Feb 09, 2019 2:20 am

Govt accuses Amazon, Flipkart of violating e-comm FDI rules
Times of India

URL: https://timesofindia.indiatimes.com/bus ... 860137.cms
Category: Politics
Published: February 6, 2019

Description: NEW DELHI: The government has defended its decision to rework the rules for marketplace model, accusing the country’s top e-tailers Flipkart and Amazon of operating “hybrid” marketplaces, which were anchored by inventory-based operations through a network of controlled sellers. This is the first time since the new rules were announced on December 26, there is clarity on how the e-tailers, who were lobbying at all levels in the government, were “circumventing” the previous rules. Earlier, the government had said it was acting on complaints submitted by several stakeholders. “Flipkart and Amazon were influencing prices of goods on their platforms through various means, including direct price discounts, covering marketing expenses (marketing campaigns, EMI, exchange offers) and extending concessional logistics services (packaging, courier, returns) wallet cash backs,” a source told TOI. “Both Flipkart and Amazon involved various intermediaries and group entities in the chain to divide these discounts and spread losses, which impact the domestic retail sector.” For instance, Amazon Wholesale India would buy branded goods in bulk from manufacturers and allegedly sold to sellers such as Cloudtail, Rocket Kommerce and Green Mobiles at a discount, with the losses booked on its books. Amazon Seller Services is accused of paying for marketing, zero-cost EMIs and some of the other expenses. It would also handle the logistics-related activities, with a discount built in. Amazon Pay was also offering cash back, which was seen as a discount. Similarly, Flipkart India allegedly bought goods in bulk, sold it to sellers linked to it such as RetailNet, SuperComNet and OmniTech Retail, Truenet Commerce and India Flash Mart at a discount. Then, Ekart Logistics undertook packaging and shipments, with PhonePe offering cashbacks. While sources said the operations violated Press Note 3 of 2016, Amazon and Flipkart denied any irregularities. “These comments are completely baseless and untrue. We have received no such communication from the government. We have always been and continue to be compliant with all local laws and regulations,” an Amazon India spokesperson said. A Flipkart Group spokesperson refused to comment. “The impact on Flipkart seems to be less in the short term but there will be long-term ramifications on its business model due to the tweaks in the policy,” said a company executive. Several sellers, apart from trader lobby groups such as CAIT and Swadeshi Jagran Manch, had complained about the practices adopted by e-tailers, which prompted the government to step in, sources said.



Losses of Amazon and Flipkart to go up due to FDI policy: Report
Times of India

URL: https://timesofindia.indiatimes.com/bus ... 859280.cms
Category: Business
Published: February 6, 2019

Description: BENGALURU: Amazon India and Flipkart are likely to see higher losses due to the fall in sales and increased compliance costs in the aftermath of the updated FDI policy for online marketplaces, according to analyst reports from Morgan Stanley. While the losses for Amazon may double in three years, Walmart could see an incremental loss of $280 million from Flipkart — where the US retail giant acquired 77% last year — by year-end on top of the projected $1.5 billion. This comes just as Amazon was able to curb losses in its international unit, where India contributes significantly, from a little over $3 billion in 2017 to $2.1 billion in 2018. But a note by Morgan Stanley MD Brian Nowak, reviewed by TOI, said new regulations could lead Amazon to a wider long-term loss. “We are paying attention to the long-term impacts of this law (new FDI clarifications) which, in our view, is likely to lead to increased Amazon India investment and larger losses from restructuring its business operations ... We would also expect this to lead to higher long-term competition as this law should make it easier for other India-based companies to build and compete in e-commerce,” it added, predicting Amazon’s international business losses could swell to around $4 billion in the next three years. New York-based investment bank and financial services major JP Morgan has also said that Amazon’s total India revenue would be cut abruptly to about $5.3 billion at the end of March 2020 due to the new policy against the original estimate of $7.3 billion. In a separate note, Morgan Stanley also said that if Flipkart is forced to remove 25% of products, it may cause a 40% slowdown in revenues. Adding compliance costs, it will lead to an incremental $280 million in Flipkart losses on top of a guidance of about $1.5 billion for 2019, causing a negative 1.3-1.5% impact on Walmart’s 2019 ebit/EPS. For context, both Amazon and Flipkart together reported losses of over Rs 9,500 crore at the end of March 2018. This includes their marketplace as well as wholesale arms. The new policy puts a series of curbs on how both Amazon India and Flipkart operate — restricting discounts, no ownership in sellers on the marketplace platform, and disallowing exclusive product launches — forcing them to restructure operations and take a hit on sales. Among global investors, there is scepticism that the FDI rules hitting India business could impact the March quarter sales for Amazon, the note by Morgan Stanley said. The JP Morgan report added that gross sales for Amazon, which were estimated at $15 billion as of March 2020, would fall short significantly at $10.8 billion. It estimates a similar gross sale target for Amazon India in March 2019. Morgan Stanley estimates that Flipkart holds about 48% market share, which could change under the new rules as it is easier for competitors to enter the market now. A drop in market share could also reflect in slower gross sales. Domestic industry experts added companies like Amazon and Flipkart are trying to adapt to new guidelines but it could still take some time before normalcy is restored. Legal experts have also told TOI that creating new seller firms or working with a new set of existing but smaller sellers creates “operational inefficiency” and also delays delivery timelines. Amazon has already seen about half a dozen new sellers gaining prominence on the marketplace.



Morgan Stanley warns Walmart may exit Flipkart post new FDI rules
Times of India

URL: https://timesofindia.indiatimes.com/bus ... 845442.cms
Category: Business
Published: February 5, 2019

Description: MUMBAI: Wall Street biggie Morgan Stanley said Walmart may exit Flipkart in a similar move to what Amazon did in China if the retail giant can’t see a long-term path to profitability. The brokerage said in a report dated February 4 that “an exit is likely, not completely out of the question, with the Indian ecommerce market becoming more complicated”. The report comes in the wake of the new Foreign Direct Investment (FDI) rules for the India’s ecommerce sector which were implemented by the government on February 1. The government’s Press Note 2 issued in December last year bars online marketplaces and their group companies from owning their vendors and prohibits them from controlling the inventory sold on their platforms. “There is a precedent for an exit as Amazon retreated from China in late 2017 after seeing that the model no longer worked for them,” the Morgan Stanley report titled ‘Assessing Flipkart Risk to Walmart EPS’ said. Morgan Stanley said Flipkart may need to remove approximately 25% of its products from its site in light of the new rules. Smartphones and electronics would feel the greatest immediate impact because of the necessary changes to supply chains and existing exclusivity deals, the brokerage said. “We estimate that Flipkart derives 50% of its revenue from this category, meaning Flipkart could face meaningful disruption and top-line pressure in the near term,” it said. Historically, Flipkart’s gross sales have been driven by smartphone and electronic sales which are high-priced. Responding to ET’s query, a Walmart spokesperson said: “Despite the recent changes in regulations, we remain optimistic about the ecommerce opportunity in India given the size of the market, the low penetration of ecommerce in the retail channel and the pace at which it is growing. As Walmart scales in India, the company will continue to partner to create sustained economic growth across agriculture, food and retail. Future investments will support national initiatives and will bring sustainable benefits to the country.” Amazon and Flipkart have been the most impacted online marketplaces and have seen a drop of around 25-35% in sales after having to rejig their seller entities where they held an equity stake. Amazon’s two top sellers — Cloudtail and Appario Retail — removed products sold by them after the new guidelines kicked in on February 1 as they were joint ventures formed by the American online retail behemoth.



Amazon, Walmart lose over $50 billion in market value after e-tail policy change
Times of India

URL: https://timesofindia.indiatimes.com/bus ... 804639.cms
Category: Business
Published: February 2, 2019

Description: BENGALURU: US-based corporations Amazon and Walmart, which owns 77% stake in India’s largest online retailer Flipkart, together lost over $50 billion in market capitalisation on Friday after the government’s updated e-commerce policy came into effect. Both companies have made big bets on the Indian retail market - with Amazon committing $5 billion here while Walmart spent $16 billion last year to buy a controlling stake in Flipkart. Nasdaq-listed Amazon’s shares fell by 5.38% to $1626.23, losing $45.22 billion in market capitalisation. Walmart’s share price fell by 2.06% to $93.86 on NYSE, losing $5.7 billion in market capitalisation. At the close of trade on Friday in the US, Amazon was valued at $795.18 billion while Walmart was at $272.69 billion. Part of the fall in share price of Amazon, which also reported its fourth-quarter results on Thursday, was driven by the company’s plans to increase spending not related to India. But Amazon’s international sales, which includes the India business, also saw a slower growth even before the new policy came into effect. Amazon’s International net sales grew by 15% to $20.83 billion during the quarter ending December 2018, as compared to a 29% growth in the year-ago period. At the same time, it was able to narrow its International losses by 30% to $642 million for the quarter, from $919 million in the corresponding quarter last year. Walmart is expected to declare its quarterly results later this month. Flipkart said that it was “disappointed” about the government’s rush to implement the updated e-commerce policy and not allowing an extension to restructure the business. Amazon has also said that it will engage with the government for further clarifications "to minimize the impact on our customers and sellers." The Department of Industrial Policy and Promotion (DIPP) had said on Thursday that it will not be extending the timeline for the implementation of the updated e-commerce policy, which was released in late December. Amazon and Flipkart, which account for about 75-80% of the online retail business in India and rely on a handful of large sellers for a majority of sales, had intensely lobbied for an extension. While Amazon had sought a four-month extension, Flipkart had requested the government for about six months to comply with the new rules. The policy said that e-tailers cannot hold a stake in seller entities that sell on their marketplace, which cause Amazon India to delist lakhs of products overnight. Before the regulation, Amazon India had two seller entities - Cloudtail (a joint venture with Narayana Murthy’s investment firm Catamaran) and Appario Retail (a joint venture with Ashok Patni family office) - which accounted for a majority of the sales on the platform. Under the new rules, e-commerce firms also need to check they are not sourcing over 25% of a seller’s gross sale through wholesale units like Flipkart India Private Limited and Amazon Wholesale. The impact of this is likely to be felt in a few weeks as sellers start running out of inventory even as both Flipkart and Amazon India restructure agreements with brands, especially exclusive launches. Under the new norms, e-tailers also cannot directly or indirectly influence the pricing of products on their platforms.
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How Narendra Modi’s political priorities ambushed Amazon and Walmart, and benefited India’s richest man

Postby smix » Sat Feb 09, 2019 5:26 pm

How Narendra Modi’s political priorities ambushed Amazon and Walmart, and benefited India’s richest man
The Japan Times

URL: https://www.japantimes.co.jp/news/2019/ ... chest-man/
Category: Business
Published: February 5, 2019

Description: MUMBAI - Amazon Inc. and Walmart Inc.’s plans to dominate India’s online retail landscape have been ambushed by Prime Minister Narendra Modi’s political priorities heading into a tightening election. The vote, which must be held by May, has increased the influence of local retailers that lobbied for growth-crimping curbs on the U.S. giants. On cue, India this month rolled out constraints on foreign e-commerce players, including Jeff Bezos-led Amazon and Walmart-owned Flipkart, which together control 70 percent of its online shopping. The tighter rules, aimed at protecting small traders, may end up benefiting the country’s richest man, Mukesh Ambani, who is building a homegrown competitor.

modi-the-clown.jpg

Modi’s Bharatiya Janata Party is still licking its wounds after being trounced in three key recent state polls and a year ago fighting an unexpectedly close contest in Gujarat — Modi’s home state. Among small businesses, which are a traditional support base, the government’s popularity has been eroded by 2016’s surprise cash ban and the subsequent chaotic rollout of a new sales tax. The rules now bar Amazon and Flipkart Online Services PTE from owning inventory and require them to treat all vendors equally, throttling discounts and exclusives — a huge advantage to homegrown companies, including Ambani’s new venture. His Reliance Industries Ltd., which owns India’s largest retail chain and third-biggest telecommunications network, has the potential to evolve into a local version of Amazon or Alibaba Group Holding Ltd., UBS AG said last month. “Whether serendipitous or not, India’s tightened regulatory regime for online retailers is a huge win for Reliance with its new retail ambitions,” said Sanchit Vir Gogia, chief executive officer of consultancy Greyhound Research. “This could be a field leveler for them.” Ambani wants his consumer offerings — covering telecommunications, fiber-to-home broadband, media and entertainment, and retail — to contribute nearly as much to the conglomerate’s overall earnings as its bread-and-butter energy and petrochemical businesses. He is fresh from disrupting the nation’s telecom sector, which he entered in 2016 with services so cheap that rivals have quit, merged or gone bankrupt — including a carrier controlled by his younger brother. On the back of that success, he last year unveiled plans to create a model that combines Reliance’s consumer offerings into a “hybrid, online-to-offline new commerce platform.” Analysts at UBS predict Reliance can gain market share in new-age retail given its starting point of 280 million telecom subscribers, a broadband offering, extensive content and a web of 10,000 stores nationwide. The company also wants to partner with India’s 12 million mom-and-pop shops to create distribution and delivery centers. Reliance resembles Alibaba in its ability to offer bundled services in a fast-growing, fragmented market with low online penetration, according to UBS. “In retail/e-commerce, despite competition from well-funded global companies, Reliance’s wide footprint of physical stores along with its omni-channel focus, subscriber reach and regulations governing foreign e-commerce entities,” could help it gain market share, analysts wrote in a Jan. 24 report. The U.S. retail giants are being curbed in a market where they have committed billion of dollars and, until recently, seemed to have already won. Both Amazon and Walmart will have to reduce cash-back payments and discounts — a sore point for smaller sellers, who accuse the pair of predatory pricing. To meet rules, the companies have also removed thousands of products from virtual shelves, must redraw contacts with merchants and brands and are bracing for a full-fledged e-commerce policy that is under review. Flipkart’s losses may rise 20 percent to 25 percent following the changes, according to Morgan Stanley, which said in a report that it didn’t think Walmart was considering walking away from the investment. The world’s largest retailer is “financially and strategically invested in India,” analysts wrote, adding that it may make sense to exit if Walmart can’t see a long-term path to profits. Walmart has suffered other setbacks. During the course of its Flipkart acquisition and soon after, it lost the co-founders of its new purchase. Their know-how and connections would have helped the U.S. retailer better navigate this latest regulatory wrinkle. Reliance will probably use the opportunity posed by the government’s tighter rules to make a “grand entry” into e-commerce, said Praveen Khandelwal, secretary-general for the Confederation of All India Traders, a lobbying group that had threatened political repercussions if the Feb. 1 rollout was delayed. Ambani had last month mapped out the beginnings of his strategy, which involves rolling out a shopping platform to 1.2 million store owners in western India. As the initiative expands, the company will enlist more neighborhood shops as distribution and delivery centers for products that will be available on its mobile platform, people familiar with the plans said at the time. An integrated platform will probably be launched within 18 months, the people had said. “Our agenda is to ensure a level playing field,” Khandelwal said. “Players such as Amazon and Walmart are in a major fix post the new guidelines, and they will take time to restructure their operations.’ Neighborhood stores have already started working with the big online retailers such as Amazon, leveraging their advantages of last-mile access and familiarity with their customers. “We have been around for many years and know our customers very well,” said Laiji Varghese, owner of a small provision store on the outskirts of Mumbai. That is why “Amazon and Reliance want to tie up with us.”
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Rumors of a Flipkart exit swirl around Walmart as chaos engulfs Indian e-commerce

Postby smix » Sat Feb 09, 2019 7:05 pm

Rumors of a Flipkart exit swirl around Walmart as chaos engulfs Indian e-commerce
ZDNet

URL: https://www.zdnet.com/article/rumors-of ... -commerce/
Category: Business
Published: February 8, 2019

Description: Amazon and Walmart have suffered market cap hits, as well as substantially lower revenue and profit growth projections thanks to an ill-conceived and politically opportunistic move by the Indian government.
If I were the senior management of Walmart, I would be feeling enraged right now for being duped by a craven and opportunistic BJP government in India. Demolished in the local elections -- which was an important litmus test for the upcoming national polls in 3 months' time -- the BJP decided to suddenly, without warning, enforce a fuzzy e-commerce policy that has effectively dismantled the business models of Amazon and Walmart-owned Flipkart, throwing the e-commerce sector into utter chaos. The online retail market in India has more than tripled since 2015, but it is only expected to contribute to 2.9 percent of the total retail sales in 2018. While this has undeniably resulted in the deterioration of Indian retail, the primary issue with the new e-commerce policy has been in its timing and the nature of the government's diktat that seeks to assuage the legitimate fears of a large vote bank made up of small traders and shopkeepers that is in question. The markets -- and shareholders -- predictably didn't like these turn of events one bit. Amazon's shares fell by 5.4 percent, wiping out over $45 billion in market cap, while Walmart's shares fell by 2 percent with a loss of $5.7 billion. Yet it is the now-damaged growth rates and loss estimates that are causing the most concern. Emerging reports suggest that both companies have seen a third of their sales volumes vanish into thin air since the new policy came into effect on February 1. Amazon reportedly took down at least 25 percent of its products from its website. JP Morgan said the company's previous 2020 revenue estimates for India of $7.3 billion could fall all the way down to $5.3 billion. Walmart could see an additional $280 million of losses from Flipkart because of the recent fiasco and this could conceivably rise further. As such, Morgan Stanley in a recent report titled Assessing Flipkart Risk to WMT EPS suggested that "an exit is likely not completely out of the question with the India e-commerce market becoming more complicated", according to the Economic Times. The report drew many parallels between the current situation with a previous exit from two years ago, referring to Amazon's retreat from China in late 2017 after it saw that the business model used was no long viable. Anindya Ghose, the Heinz Riehl professor of business at New York University told Quartz: "Walmart and Amazon will feel more than a pinch. It is not a big stretch of imagination to understand why Walmart may want to back out of the Flipkart deal." The hard truth is that Flipkart, which gets 50 percent of its revenue from smartphones sold through what have, so far, been ultra-popular, exclusive deals, will no longer be able to use these channels of sales. While that portends a looming disaster of unknown proportions for Amazon and Flipkart, for now, the biggest hits to their bottomlines are taking place in the compliance department. Lawyers and senior management at Amazon and Flipkart are working furiously to determine what they can actually sell under the new restrictions, as well as from whom they can source these products. It's an epic undertaking. No longer will the two companies be able to sell anything sourced from an entity that provides them with goods amounting to more than 25 percent of their sales. Additionally, neither of these two e-commerce giants can hold any equity stake in an outfit that sells goods on their sites. Both companies were widely seen to have consistently ignored these two rules, ably aided by the Indian government who did nothing for two entire years. Until, of course, the recent December 'Note' that has sent Amazon and Flipkart into a tailspin. Now, both companies face the gargantuan headache -- nevermind the cost -- of identifying new sellers to fill up the shortfall and training them appropriately. It is no wonder then, that Morgan Stanley has estimated a 10-70 percent slowdown in the 30 percent growth rate that was supposed to propel the industry from $30 billion today, to $200 billion by 2026. Of course, Walmart predictably provided a sanguine outlook in reaction to these events: "Despite the recent changes in regulations, we remain optimistic about the e-commerce opportunity in India given the size of the market, the low penetration of e-commerce in the retail channel and the pace at which it is growing…" it said to the Economic Times. Even Morgan Stanley admitted in its initially bleak-sounding note that "we do not think Walmart will step away from India. We think Walmart will conform to the new regulations and try to determine a strategy to reach profitability over time." Negotiating the fickle political and policy landscape of India is not something new for Walmart, which has been entrenched in the country since 2007 and survived previous unfavourable policy shifts to emerge as a successful and profitable wholesale business. However, if the company decides to move on from Flipkart, it will be in a fire-sale that leaves it bleeding profusely -- no one in their right mind would buy the firm at cost considering the current rules. Walmart will just have to slog it out for the long haul and hope for better days and fewer competitors to turn its rapidly souring investment into something more palatable.



Fear and loathing in India: BJP insists Amazon, Flipkart adopt new e-commerce rules by Feb. 1
ZDNet

URL: https://www.zdnet.com/article/fear-and- ... -by-feb-1/
Category: Business
Published: January 31, 2019

Description: Reeling from defeats in local elections and also hoping to curry favour from a large vote bank of shopkeepers and tradespeople before national elections in a few months, India's BJP government insists that Flipkart and Amazon migrate to new rules almost overnight, causing losses that may amount to as much as 40 percent of revenues.

modi-bezos.jpg

Is it possible that a purportedly business-friendly government can, in the blink of an eye, destroy -- or at least severely damage -- its most celebrated industry in the tech-meets-commerce space? This is what seems to be unraveling, as Flipkart and Amazon face an unyielding February 1 deadline to alter their business models from one that is a direct purveyor of goods -- like Amazon in the US, for instance -- to one that is a marketplace similar to eBay. In other words, these two companies will have to dismantle their business model almost overnight and establish completely new supply chains and vendors in order to comply with this decree, something they would not have imagined in their wildest of imaginations. Amazon has so far pumped $5.5 billion into the country, and Walmart last year forked out $16 billion to acquire Flipkart under the assumption that the country would continue to be a future growth engine for global e-commerce. Instead, they have fallen prey to a whimsical government that is desperate to claw back into political contention. Prime Minister Narendar Modi may have aspired to create a carefully manicured image of being a business-minded visionary, wooing companies to set up manufacturing plants in his country. However, a string of decisions have quickly tarnished his image. Among them are his tacit appeasements of communal atrocities against the Muslim population such as public lynchings, and the banning of existing currency notes and the printing of new ones in order to expunge the nation of black money. The decision to ban existing currency notes eventually slowed down economic growth and caused nationwide damage to the livelihoods of the poor, while in a case of cruel irony, 99.3 percent of black money allegedly found its way back into the system in just a few months, according to Mint. Now, all this was still fine for large portions of India's middle and upper middle class, who were in thrall of Modi and his business-friendly, 'Hindu-first' vision for India, but the common man has not shared the same sentiment. The people's frustrations have not been more clear than in the recent drubbing of Modi and his BJP party by its arch-rival the Congress party in local elections, which took place in what should have been safe beachheads of the north. So unexpected was the defeat that the BJP government had to act immediately to resuscitate its large vote bank of shopkeepers and tradespeople whom they have taken for granted since coming to power. Until now, that is. For two years since issuing its tweaked rules in 2016 that outlined a marketplace model and no more than 25 percent ownership in sellers of its goods, the government has done nothing. In fact, as I have pointed out in this recent story, after being deluged by complaints filed by tradespeople about predatory and monopolistic pricing practices by Amazon and Flipkart, government kicked over the whole issue to industry watchdog, the Competition Commission of India. The CCI eventually declared that nothing seemed to be rotten in the states of India. "Looking at the present market construct and structure of online marketplace platforms market in India, it does not appear that any one player in the market is commanding any dominant position at this stage of evolution of market," the Commission said in its decision. A BJP spokesperson followed this up by telling a local publication: "It seems that the [e-commerce] industry doesn't need a policy, but a set of rules will help in taking the industry to the next level," a senior Commerce Ministry Official said to Indian tech website Factordaily. This is despite an e-commerce draft policy that made the rounds asking for the clipping of wings of monopolistic, global players with massive warchests, albeit via a sunset clause, that would allow them some time to rejig their business models. The fact is that Amazon and Flipkart have used VC funding to be able to flog things at ridiculously low prices in order to grab market share. The fact also is that offline retail, $700 billion in size compared to online retail's paltry $20 billion, is simply unable to compete with global-capital funded steep discounts. It is widely-known that Amazon and Flipkart, despite the rules, conduct an enormous part of their operations via the use of seller entities, which they have heavily invested into as purveyor of goods. None of this is hotly disputed. But instead of providing clarity on this policy in advance, thereby allowing time for Amazon and Flipkart-owned online retailers to migrate to a new model methodically via a sunset clause, the government, stricken by the spectre of political defeat in the upcoming national elections in three months, has decided to resort to their own desperate measures, the health of e-commerce be damned. The result of all of this? Amazon may well see a third of its $6 billion in sales evaporate, at least for now in order to comply with the new rules; Flipkart may see a quarter of its sales vanish. According to ratings firm CRISIL, that loss could be as high as 40 percent of revenues in two years, amounting to between Rs35,000 crore ($5 billion) and Rs40,000 crore ($5.71 billion). Flipkart Chief Executive Kalyan Krishnamurthy immediately sent a letter to the government requesting for more time. "Redesigning numerous elements of our technology systems to ensure that we can validate and evidence our compliance, in such a compressed period of time, has caused us to divert significant resources," wrote Krishnamurthy. Flipkart ships between 500,000 and 600,000 packages a day and Amazon alone has 400,000 sellers. Therefore, both companies say that the new rules, sans a sunset clause, will cause a lot of trauma to their operations and sales. For now, the government is standing firm on its decision, reiterating yesterday that it will not extend the February 1 deadline despite Amazon and Flipkart both requesting for an extension. Look for this to change if the BJP wins the upcoming election.



Why Walmart could get severe indigestion from its Flipkart acquisition
ZDNet

URL: https://www.zdnet.com/article/why-walma ... quisition/
Category: Business
Published: May 16, 2018

Description: Walmart's investors may not have the appetite for a prolonged battle with Amazon in India that will involve funding steep losses caused by excessive discounting.
About six days ago, Walmart undertook a historic acquisition and its most expensive one in recent memory when it swallowed India's ecommerce leader Flipkart by shelling out $16 billion for a 77 percent stake. There is much for Walmart's investors to celebrate in the firm spotting the right opportunity at the right time to safeguard its place in a digital future dominated by the ever-rampaging Amazon. After unspectacular efforts in China and Japan, this US retail leviathan may never get another opportunity to assure itself of a captive, fast-growing and potentially mammoth audience for its wares in the online realm. India represented its last chance -- as it was Amazon's, following getting shut-out in China -- and the Bentonville, Arkansas-based retailer has been virtually forced to play this hand or risk regretting it forever. Or so the narrative goes. The big question now making the rounds in the euphoric aftermath of the deal and putting a dent into that story is whether the deal will be worth it at all. Will it make economic sense for the company once you shove aside all the familiar hype about India's burgeoning middle-class? Naysayers who instantly weighed in after the deal announcement happened to be no other than the company's investors. Walmart's stock took an instant beating, losing 5 percent in early trade and wiping some $10 billion of its market cap. What investors are undoubtedly looking at are two things: One, this is a whole new game being played in the world of bits and bytes and online purchases that is alien -- in fact, even anathema -- to a retail giant more at home in the brick-and-mortar world. The online business model is an eminently profligate one that is no doubt making Sam Walton fans grimace with its bitter aftertaste. This is because Flipkart's strategy, which has attracted its current 100 million customers who have bought roughly $3 billion worth of goods in the last fiscal year, has been engineered by offering steep discounts funded through its large VC funding rounds leading to steep losses. These have totalled a staggering $3.6 billion in the last three years and Walmart will have to assume a fresh $900 million black hole for the remaining six months of this financial year for it will be regarded as the Indian company's new owner. To put things in perspective, my former employer Business Standard carried an excellent analysis of what the future could hold for Walmart investors. For Flipkart to post a 10 percent return on capital so it can come somewhat close to the five-year 11.2 percent return on capital of its new parent, it would have to achieve a topline growth of $100 billion in just a matter of a few years -- something Amazon's global operations did only recently in 2015 and therefore an absurd expectation. In other words, investors will have to patiently soak in the continuing considerable losses for years with the expectation that the tide will turn at some point in the distant future, making all of this worthwhile. And that, of course, will only be possible by pumping vast amounts of money into Flipkart while simultaneously warding off Amazon, who has already spent $5 billion in just a few years and is only beginning its innings in India. The second big question revolves around when that "distant future" may arrive. Morgan Stanley predicts close to 500 million online shoppers in India in 10 years and industry estimates trumpet the retail industry scaling to $1.8 trillion by 2027. While India's gigantic population is undeniable, the fact is it still remains a very poor country with a per capita income just a little over $1,500 with low ecommerce average order values, terrible infrastructure, and requiring complex logistics. As Quartz notes, ecommerce in 2016 was just 2 percent of retail trade, but even when the share of online retail to overall trade is expected to double by 2026, it will still only be 12 percent. Of course, there are positives. The firm would not have slapped down such a large sum without being comforted by the fact that real estate prices in India can get to stratospheric levels, neighbourhood stores where most Indians get their basic provisions command higher prices, and rural areas are not able to give their smartphone-toting, increasingly internet savvy customers the goods that they salivate over online. However, reality bites with another distressing piece of information in Mint newspaper for ecommerce aspirants. Michelle Grant, head of retailing at Euromonitor International, said that in the largest five ecommerce markets, a clear pattern has emerged where one company is the clear leader followed by a distant second in addition to other much smaller rivals. For Walmart to become that clear leader in India it will have to turn a blind eye to the tide of red on its income statements for years down the line while pumping its hard-earned money from retail ops to fund these losses, which will be exacerbated by vicious competition from Amazon. It may not be the kind of fight that Walmart may end up having the stomach for.
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E-commerce Policy: What prompted Government to kill Flipkart and Amazon?

Postby smix » Sat Feb 09, 2019 9:40 pm

E-commerce Policy: What prompted Government to kill Flipkart and Amazon?
Netans

URL: https://www.netans.com/2019/02/06/e-com ... rt-amazon/
Category: Politics
Published: February 7, 2019

Description: The home-grown Flipkart and US-based Amazon have been killed by the Government on February 1. As far as online shoppers are concerned, the day will be a black day for all the tech-savvy online shoppers who throng to these sites on a daily basis for deals and discounts. After the implementation of the e-commerce policy, customers took to social media and widely criticized the move by the Government to regulate e-commerce marketplaces. Going forward, you will not feel the same traditional experience as in the past due to the strict e-commerce policy. The main point to note is that customers were always happy with the offerings provided by Flipkart and Amazon. They managed to purchase products with great quality at budget prices. The interesting point to note is that the e-commerce marketplaces were able to sell the items at discounted prices because there are no middlemen involved. It’s the trader’s body which objected to both e-commerce companies. The Government has taken the step to please offline traders ahead of the 2019 General Elections. With the ruling party losing out power in four critical Hindi states, it is imperative for the Government to adopt a regressive stand in a bid to please offline traders. After a detailed inspection of various articles and social media posts, we infer that few people like Ashwani Mahajan and the trader’s body associated with RSS are behind this undemocratic move. It’s absolutely sure that middlemen will rule the offline retail space and traders will start selling products at market rates. This will force customers to pay more than when compared with the e-commerce companies with steep hike in inflation. The Government of India formulated the new e-commerce policy and was rolled out on February 1. The policy envisages rigorous conditions including the way in which the e-commerce marketplaces should function. The Government has accused Flipkart and Amazon of violating the rules by creating a series of alpha sellers. Moreover, the e-commerce marketplaces are also accused of influencing the pricing system and giving discounts including cashbacks. According to Morgan Stanley, Walmart is seriously considering to exit Flipkart. The US-based retail giant will most likely sell its stakes and exit India by the middle of 2019. The sources revealed to us that the company is not in favor of working with the new policy since it’s not beneficial for the company. The rules are framed in such a way that it will be difficult for the company to earn profits. If Walmart exits India, then the future of over 50000 employees will be under threat. The employees should be prepared to face any eventuality because the management will find it difficult to proceed with the operations. The main reason is that Walmart is currently pumping funds for the company and it will stop. Hence, the management will find it tough to pay salaries. Amazon will also most likely face crunch but will be able to tide over the crisis with alternative routes. It is to be noted that Snapdeal and Shopclues have welcomed the new e-commerce policy regulations. However, the number of sales from these companies are very low when compared with Flipkart and Amazon. Hence, the customers are not only affected but also deeply disappointed with the new e-commerce policy. The company is currently considering to convert the erstwhile Cloudtail and Appario into wholesale subsidiary entities. Hence, the company will be able to sell the products via other sellers. It remains to be seen as to how the companies will implement the new rules and regulations. The profitability of both Flipkart and Amazon have suffered because of the new guidelines. Moreover, the companies are unable to offer replacements for the items sold before January 31. The Government has killed Flipkart and Amazon. It remains to be seen as to whether people will abandon the current Government headed by Narendra Modi in May 2019. Let’s wait and watch.
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Amazon and Flipkart race to adapt to India's new e-commerce rules

Postby smix » Tue Feb 12, 2019 3:21 pm

Amazon and Flipkart race to adapt to India's new e-commerce rules
Nikkei Asian Review

URL: https://asia.nikkei.com/Business/Busine ... erce-rules
Category: Business
Published: February 12, 2019

Description: Smaller merchants accuse the tech giants of exploiting regulatory loopholes
MUMBAI -- Amazon.com and Walmart-backed e-commerce startup Flipkart are moving quickly to comply with new Indian foreign direct investment rules that aim to curb the power of the two companies, which dominate over 60% of the country's online shopping market. The rules imposed on Feb. 1 are widely seen as a populist move by Prime Minister Narendra Modi to protect millions of mom-and-pop shops from the threat of these global giants, and win the merchants' votes in the upcoming general election. Yet Amazon and Walmart are clearly not ready to give up on a market that is expected to grow fivefold in less than a decade. By 2026, the e-commerce market is forecast to be worth $200 billion, up from $38.5 billion in 2017, according to the government's India Brand Equity Foundation. To prevent big e-commerce companies from running away with the retail competition, Modi's government has banned deep discounts and blocked e-commerce platforms from selling products through local companies in which they have ownership stakes. But after a cacophonous first week that saw Amazon pull some product listings from its website and briefly halt its same-day grocery delivery service Amazon Pantry -- prompting customer complaints on social media -- the company has adjusted faster than anyone expected. All of the listings have returned. The Jeff Bezos-owned company has reportedly decreased its stake in Cloudtail, a joint venture and the largest vendor on the Amazon site, to 24% from 49%. In turn, partner N.R. Narayana Murthy's Catamaran Ventures lifted its interest to 76%. The change means Cloudtail is no longer considered an Amazon group company under India's rules, making it once again eligible to sell on the platform. Amazon is exploring a similar cut to its ownership of Appario, a joint venture with Ashok Patni Group, one of India's largest retailers. Cloudtail will also sell its inventories on other marketplaces such as Snapdeal and ShopClues. In addition, according to industry sources, Amazon is offering incentives to some large sellers by cutting commissions. Leading rival Flipkart, meanwhile, is in talks with large offline sellers and distributors for potential tie-ups, two sources with knowledge of the matter said. According to one source, it is also likely that Walmart may begin selling its products on the Flipkart platform through a third party in India, instead of directly listing on the website. Analysts say that while it will take time for the impact of the new rules to become clear, they have been surprised by the swift reaction. "The normalization of sales will [happen] faster than we had thought," said Satish Meena at Forrester Research. "We had expected them to take at least one to 1.5 months. They have clearly found a way out." In a note released on Feb. 4, Morgan Stanley had said the new e-commerce regulations would increase the cost of doing business in India. Though the situation is fluid, Walmart could take a hit of 1.5% to 2% on earnings per share for the financial year ending March 2020, according to the note. "Walmart is financially and strategically invested in India via Flipkart. We do not think it is considering walking away from its investment at this stage," Morgan Stanley wrote. "But, as Amazon did in China, it may make sense to potentially walk away if [Walmart] can't see a long-term path for profits." The foreign direct investment rules that came into effect on Feb. 1 bar these companies from giving preferential treatment to suppliers. They also force them to apply cash-back incentives across the board, regardless of whether items are bought from a preferred seller. Until now, the platforms were able to offer the rebates on purchases from affiliates, prompting other sellers to complain about an uneven playing field. The e-commerce giants had sought an extension to the Feb. 1 deadline to comply with the rules, but the government turned down the request. The moves by Amazon and Flipkart to comply have irked both online rivals and small traders, who have frequently complained about the heavyweights' practices of selling through group companies, dangling major discounts and promoting favored sellers. The All India Online Vendors Association said it was expected that the two companies would find loopholes in the policy. "They want to carry on multibrand retailing through these ways," the association said. "We are concerned because in doing so the marketplace is tilted to favor them through commercial and policy advantages in an unjust way. "The problem is not only with current violators, as this can be potentially used as a business model by anyone and everyone and [the] solution doesn't lie through an unenforceable policy." The Confederation of All India Traders also called Amazon's latest move a circumvention of new rules. The confederation said in a statement that it has gone to the Commerce Ministry with a demand to clarify that e-commerce platforms should not hold direct or indirect stakes in their vendors. "These companies are known habitual offenders of policy and now they are trying ways and means to continue their unethical business practices by circumventing the policy to their advantage," said Praveen Khandelwal, the confederation's secretary-general. "The CAIT has sent a communication to Commerce Minister Shri Suresh Prabhu calling for his immediate intervention in the matter before it's too late."



India risks US backlash over rules hitting Amazon and Walmart
Nikkei Asian Review

URL: https://asia.nikkei.com/Economy/India-r ... nd-Walmart
Category: Politics
Published: December 28, 2018

Description: Modi tries to protect local stores as online shopping booms
MUMBAI -- India's new restrictions on how e-commerce companies such as Amazon and Walmart's Flipkart sell in a fast-growing online market could spark accusations of protectionism from the U.S. government, analysts say. The regulations announced on Wednesday ban e-commerce companies from selling products through local businesses in which they hold a stake, and also tighten rules on practices such as deep discounts. Both U.S.-based companies have been investing heavily in India's e-commerce market, often to the ire of local bricks-and-mortar retailers and smaller vendors. Walmart spent $16 billion earlier this year to buy a 77% stake in Flipkart, while Amazon has earmarked a $5 billion investment in the country. The rules, which take effect on Feb. 1, appear to hit Amazon's local joint ventures Cloudtail and Appario Retail, as well as Walmart's plans to sell products through Flipkart. Cloudtail is led by IT services provider Infosys' co-founder N.R. Narayana Murthy, while Appario is a joint venture with Ashok Patni Group, one of India's largest retailers. Amazon and Walmart together hold more than a 60% share of India's estimated $19.6 billion online retail market. The India Brand Equity Foundation projects India's e-commerce revenue at $120 billion in 2020, up from $39 billion in 2017. That makes for an annual increase of 51% -- the highest growth rate in the world. Harish H.V., a partner at accountancy Grant Thornton, says foreign e-commerce companies will have to adapt to the new rules, which will hamper their ease of doing business. "I think the U.S. is going to make a big noise about it because Walmart has just put in $16 billion," he said. "If Amazon, too, thinks it is affecting their way of doing business, they may go and complain to the U.S. government, saying these are restrictive practices." According to TRA Research CEO N. Chandramouli, rules in e-commerce should keep customers' value in mind and let companies figure out how to win competition. "Walmart is a very heavy investor both in Indian e-commerce and in the U.S., so naturally policy pressures will come. After they invest, you cannot make a rule that will jeopardize anyone's investment," he said. "Every country is looking at India. India has not blossomed fully as [a foreign direct investment] destination yet. ... I don't think India should go in for protectionist measures now." India seems to have partly given into the demands of local players, as Prime Minister Narendra Modi seeks a second term in elections during the first half of 2019. Traders and small businesses form a very large voter base, with strong allegiance to Modi's Bharatiya Janata Party. They faced the brunt of the disruption caused by the Modi government's ban on high-value bank notes in 2016 and the subsequent introduction of a nationwide Goods and Services Tax. With a dismal performance in elections held in several states earlier this month, Modi is unlikely to take any chances with his popularity. U.S. President Donald Trump, meanwhile, has complained about Indian tariffs. During the Group of Seven summit in July, Trump accused New Delhi of imposing duties of up to 100% on some U.S. goods and threatened to cut ties to countries that were "robbing" America. Pointing to high tariffs on Harley-Davidson motorcycles, he has threatened to raise duties on Indian-made motorbikes imported to the U.S. The new rules announced on Wednesday evening say that "an entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity." The rules also bar these companies from giving preferential treatment to suppliers, and require cash-back incentives for customers making online purchases to be paid regardless of whether items are bought from affiliates of the e-commerce platform. "Provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory," the statement said. It asked e-commerce marketplace operators to furnish a certificate along with an annual report from the statutory auditor to the Reserve Bank of India, confirming compliance of the new guidelines, by Sept. 30 every year. Local vendors and companies welcomed the new rules, which are largely in tune with their complaints against e-commerce businesses. In October, the All India Online Vendors Association, which represents around 3,500 online sellers, had complained to the Competition Commission of India, alleging preferential treatment by Amazon toward Cloudtail and Appario. There were also allegations that foreign companies sought a backdoor entry into the restricted multibrand retail segment. The Confederation of All India Traders, another trade body that has over 70 million merchants as members, praised the government for bringing clarity on FDI in e-commerce "to wipe out confusion and a communication gap, which was used as a tool by the e-commerce players and [multinational companies] for playing their own game." "Clarifications by the government will prove to be an embargo on such practices. It's a big achievement after a long struggle," CAIT Secretary General Praveen Khandelwal said. "If it is implemented in proper spirit, malpractice and predatory pricing policy and deep discounting by e-commerce players will be a matter of the past."
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Amazon, Facebook and Walmart Need to Watch Their Backs in India

Postby smix » Tue Feb 12, 2019 4:11 pm

Amazon, Facebook and Walmart Need to Watch Their Backs in India
The Wall Street Journal

URL: https://www.wsj.com/articles/as-amazon- ... 1548766862
Category: Business
Published: January 29, 2019

Description: ‘National Champion’ policy will encourage the rise of Indian businesses
NEW DELHI— Hoping to match China’s success at protecting and promoting homegrown tech titans, India has plans to continue tightening restrictions on Amazon.com Inc, Walmart Inc, Facebook Inc. and other foreign firms that have come to dominate the country’s budding internet economy. As hundreds of millions of people get online for the first time, and with national elections due in the coming months, Indian policy makers are upping the pressure on American rivals and changing policies to favor domestic players. The secretary of India’s Telecommunications Department, Aruna Sundararajan, last week told a gathering of Indian startups in a closed-door meeting in the tech hub of Bangalore that the government will introduce a “national champion” policy “very soon” to encourage the rise of Indian companies, according to a person familiar with the matter. She said Indian policy makers had noted the success of China’s internet giants, Alibaba Group Holding Ltd. and Tencent Holdings Ltd. , the person said. She didn’t immediately respond to a request for more details on the program or its timing. Asked about the comments, she said in a WhatsApp message that the idea is to promote Indian companies “to become global champions." At stake is what many think is the world’s most promising and largely untapped digital market. Some Indian corporate leaders have been ratcheting up the rhetoric in recent months. It is a tough time to start a trade debate as India is headed toward national elections before May and few politicians or policy makers are likely willing to side with big foreign firms, observers say. Mukesh Ambani--India’s richest man and the brain behind an affordable national 4G network that he is leveraging to claw out some market share in everything from video to e-commerce—invoked Mahatma Gandhi at a business conference this month and called for the end of “data colonization” by foreign firms. The blowback comes on the back of great success and huge investment by American companies. Amazon has skyrocketed to become the country’s top online retailer in recent years and is investing $5 billion. Walmart last year acquired Flipkart, India’s biggest domestic online shopping firm, for $16 billion, its largest acquisition ever. Tensions began rising last year, when New Delhi decided to create a clearer set of rules for e-commerce and convened a group of local players to solicit suggestions. Amazon and Flipkart, even though they make up more than half the market, weren’t invited, according to people familiar with the matter. They were told they could provide suggestions later. The draft policy that was hammered out last fall with input from Mr. Ambani’s Reliance Jio, along with local players, had a decidedly protectionist tone. India’s policies should be aimed at “encouraging domestic innovation and boosting the domestic digital economy to find its rightful place with dominant and potentially noncompetitive global players,” the draft said. A day after Christmas and before Amazon, Walmart and Flipkart had a chance to chime in, the government announced a new policy, demanding significant reworking of the industry before Feb. 1. The foreign firms must now rewire their supply chains and stop using some of the tactics they used to compete, such as exclusive agreements with manufacturers and deep discounts. They have been lobbying policy makers across New Delhi this year and sending letters to formally complain, asking for more time and discussion. They say it could take several months to comply. But so far policy makers haven't budged, says a person familiar with the companies’ actions. Kunal Bahl, chief executive of Snapdeal, one of India’s leading local e-commerce firms, in a letter last week that was reviewed by The Wall Street Journal praised the moves to “plug the glaring loopholes” that other companies have exploited. He urged the adoption of new policies “without delay,” noting they would help small businesses, which have been wrongly crowded out of online marketplaces by other players’ subsidiaries. The Confederation of All India Traders, a body that says it represents about 70 million online and offline domestic sellers, has warned the government of a political backlash if New Delhi submits to pressure from American interests and delays implementation of the policy. The group “will launch a nationwide protest if this happens and may vote against the government in 2019 elections,” said Praveen Khandelwal, the Confederation’s general secretary. Separately, India’s telecommunications regulator is soliciting feedback on new rules that could force Facebook’s WhatsApp and others to let authorities read encrypted messages between users on national-security grounds. That could threaten the service’s growth in India and undermine its global reputation as a secure service, should it comply. “It’s about time,” the government started taking action to protect Indian startups, said Kavin Bharti Mittal, founder of Hike, India’s biggest local messaging app and a rival to WhatsApp. If India’s tech industry is overrun by American firms, it can never truly flourish, he said.



India Increases Pressure on Amazon and Walmart
The Wall Street Journal

URL: https://www.wsj.com/articles/india-incr ... 1550996690
Category: Politics
Published: February 24, 2019

Description: Proposed e-commerce rules include an emphasis on data localization
NEW DELHI—India proposed new rules for foreign e-commerce firms, the country’s latest move to rein in large American tech companies that dominate the country’s budding internet economy. The draft national e-commerce policy is a challenge to Amazon.com Inc. and Walmart Inc. as they spend billions to expand in the world’s largest untapped tech market. As hundreds of millions of Indians get online for the first time—and with national elections due in the coming months—policy makers have increased pressure on American firms and tweaked regulations to favor domestic players, hoping to match China’s success at promoting its own homegrown tech companies. The proposed e-commerce rules, released late Saturday, include an emphasis on data localization, calling for the establishment of more local data centers and server farms. Multinational e-commerce firms typically use computing resources all over the world. “India’s data should be used for the country’s development.” the draft says. “Indian citizens and companies should get the economic benefits from the monetization of data.” To house data locally, U.S. firms might need to spend more money to use local data centers and change their processes, possibly disrupting their operations, analysts say. Companies would be given three years to comply with the requirement, according to the draft. Local data-storage rules in China forced Apple Inc. last year to begin shifting iCloud accounts of China-based customers to a local partner’s servers. India’s draft rules also stipulate that all e-commerce websites and apps available in India must have a “registered business entity” in the country. Amazon and Walmart’s Flipkart—the Indian e-commerce startup it acquired for $16 billion last year—have had local business operations registered for years, but the rule could be a challenge to smaller online sellers from the U.S. and elsewhere. “A handful of companies today dominate the digital economy,” the draft says. “They are successfully exploiting the significant first mover’s advantage in the data-driven ecosystem. Once a certain scale is reached, it becomes virtually impossible for the ‘second mover,’ on its own, to make an entry in this ecosystem.” An earlier draft of the rules began circulating last year. Companies are invited to provide feedback to the draft rules to India’s Department for Promotion of Industry and Internal Trade, until March 3. “We are currently studying the draft policy and we will provide our inputs during the public review period,” an Amazon spokeswoman said. “We appreciate the government seeking consultation on the draft e-commerce policy,” a Flipkart spokesman said. “We are going through the draft, which has been just released for comments and will be sharing our inputs in due course.” Separately, India tightened restrictions in late December by saying foreign retailers weren’t allowed to sell online through affiliated local companies. They had used that practice to comply with rules forbidding them from holding their own inventory and shipping it out to consumers. Meanwhile, India’s telecommunications regulator is considering new rules that could force Facebook Inc.’s WhatsApp and others to let officials access encrypted messages between users on national security grounds. That could undermine the service’s growth in the South Asian nation—its biggest market by users—and damage its global reputation as a secure service, if it complies. In addition, India’s Information Technology Ministry has proposed new intermediary guidelines that could affect Facebook, WhatsApp and Twitter Inc. by forcing them to more closely monitor material to respond to government requests regarding objectionable content more quickly.
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