India’s curbs on e-commerce businesses could cost them $46 billion by 2022: Report
- E-commerce players in India including
Flipkartand Amazon reportedly stand to suffer a massive setback in sales if India’s new foreign investment restrictions come into effect on February 1.
- Both Walmart-owned Flipkart and
Amazon Indiaare among companies whose sales may be hit by a loss of $46 billion by 2022.
- However, the government change its stance on India’s new
e-commerce policyclarifying that e-commerce companies will still be able to sell their private labels.
- If the change is implemented, it will probably force e-commerce players to rethink their supply chains.
The new regulation mandates that foreign e-commerce businesses can no longer sell goods from companies or entities in which they own a stake. But the government’s position is a unclear after they ‘clarified’ that e-commerce companies can still sell products under their own private label.
According to the report, the total volume of sales of goods sold online through digital platforms may see a decline by $800 million in the current fiscal year if the policy does come into effect in February. Revenue will continue to sharply drop over the next three years for those companies that will be forced comply with the new rule. Despite this, the sales may grow but won’t be able meet expectations because of the policy change.
Both Amazon and Flipkart — who have majority (70%) of revenue share in the online retail industry of India — are dependent on sales through group companies for half of their sales, reported Quartz.
The new e-commerce rules by the Indian government are aimed at safeguarding the interest of local traders. However, the new rules may also impact consumers who are now accustomed to deep-discounts and ‘exclusive’ launches, which may take a hit as a result of changes in their business model.
Before the policy was announced on December 26, Morgan Stanley estimates showed that India’s e-commerce market would witness 30% growth year-on-year over the next 10 years reaching a value of $200 billion by 2027.
Amazon and Flipkart, along with other stakeholders, are reportedly teaming up to lobby against the new regulations since it will severely impact their supply chain operations.
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