Amazon hit badly by new India e-commerce rules

Amazon hit badly by new India e-commerce rules

This, in principle is likely to severely impact both Amazon and Flipkart by barring them from selling products of entities in which they own stakes from tomorrow.

Today, e-commerce accounts for about 2-3 percent of the total retail trade in India; but as is true in economies across the globe; it will gain traction in the coming years. Both and Flipkart have to comply with these rules, and the end result is that several products that were once easily available on these platforms are no longer as easily available.

Chennai: New e-commerce rules have been implemented without postponing the deadline, much to the surprise and disappointment of majors in the retail market Amazon and Walmart-backed Flipkart.

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. "Accordingly, we request you to kindly terminate use of "Amazon Exclusives" phrase, with immediate effect", Amazon wrote in the communication.

Batting for the players, the US-India Strategic Partnership Forum (USISPF) had dubbed the new e-commerce rules as "regressive" and said these changes would harm consumers, create unpredictability and have a negative impact on the growth of online retail in India. Amazon also owns a minority stake in the parent companies of Cloudtail and Appario, even though it does not have a direct stake on either of the two sellers.

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The U.S. company's investment arm owns a 5 percent stake in Indian department store chain Shopper's Stop. Although the company's email communication sent to the Associates program members claims the decision has been taken over an internal mandate, the timing clearly points to the new e-commerce rules. The rules also target exclusivity arrangements that we see for many smartphones, meaning that it now becomes illegal for the marketplace and the seller to enter into such an agreement.

Flipkart CEO Kalyan Krishnamurthy warned last month that it faces "significant customer disruption" if the implementation of the new rules were not delayed.

Some products began to disappear from Amazon India, including Echo speakers, Presto home cleaning goods, and other AmazonBasics products. Asserting that policy should be created in a consultative, market-driven manner, Flipkart said it will continue to work with the government "to promote fair, pro-growth policies that will continue to develop this nascent sector". Amazon has already pledged to invest more than $5.5 billion in the country, and Walmart spent $16 billion previous year to acquire homegrown startup, Flipkart Online Services Pvt.

This means that let's say if Flipkart invested in a company "X", it will not be allowed to sell the product of this company "X" on Flipkart as it would give X competitive advantage.

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".

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