scorecardThe Indian government just dealt a serious surprise to Amazon and Flipkart — Here’s what that means for online shoppers
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The Indian government just dealt a serious surprise to Amazon and Flipkart — Here’s what that means for online shoppers

The Indian government just dealt a serious surprise to Amazon and Flipkart — Here’s what that means for online shoppers
Business4 min read

  • The customer may bear the ultimate brunt of new regulations implemented by the Indian government on the e-commerce giants, Amazon and Flipkart.
  • One of the main perks of shopping online has been that items were generally more affordable, especially during the sales — which may not be the case anymore with the negation of deep discounts.
  • Products will no longer be ‘exclusive’ to any platform, potentially making it difficult for sellers to set up marketing budgets with the e-commerce companies.
  • There still may be one loophole that the companies can take advantage of, but the official statement is that they’re still evaluating what the new directives entail.
E-commerce business have become a part our day-to-day lives. When you’re not in the mood to brave the holiday crowd — or maybe you’re just feeling lazy — online shopping offers an easy, not to mention efficient, reprieve.

The new directives issued by the Indian government aren’t just about how it’s going to affect Walmart’s bottom line after it’s expensive Flipkart acquisition or how either company is going to re-align its supply chain — it’s about how it’s going to affect your shopping experience come February 1, 2019, when the changes come into effect.

Ultimately, it’s not the sellers or the e-commerce platforms that are going to bear the brunt. It’s going to be online shoppers, like you and me, who are now accustomed to deep discounts, who may end up paying the price — quite literally — at least in the short run.

No more deep discounts

Diwali, Holi and Christmas — even Republic Day and Independence Day — were joyous occasions with Flipkart (including its subsidiaries Jabong and Myntra) and Amazon offering huge discounts of up to 80%. Even the average rate of discounts leveled out is at somewhere around 60%.

Those discounts may be not be around anymore. Until and unless the e-commerce giants can find a way around the new policy implemented by the Indian government, shopping online may not be as affordable.

On the other hand, it’s also possible that a neutral marketplace could encourage more competition that could ultimately benefit the consumer. But online retail only accounts for 2.9% of all retail sales in India, so e-commerce penetration is pretty limited to begin with and not an immediate threat to traditional retail.

No more ‘exclusive’ launches

Initially you may think that it’s not a bad thing that products will be available on all platforms rather than just being a ‘Flipkart-exclusive’ or an ‘Amazon-exclusive’, but being exclusive is what played a big part in allowing products to bundle in special offers.

For example, the ASUS Max Pro M2 is a ‘Flipkart exclusive’ phone and it’s able to offer Flipkart’s ‘Complete Mobile Protection’ at just ₹99, which is costs ₹999 otherwise.

Being an exclusive vendor will Amazon and Flipkart has its own perks like asking for a commitment on their marketing budget allowing them price their product accordingly.

That being said, the next Xiaomi or OnePlus launch is probably not going to be a Amazon or Flipkart ‘exclusive’.

The business of affiliate companies

So the main crux of the Indian government’s new policy is that ‘American companies are barred from selling products supplied by affiliate companies on their Indian shopping sites’. As a consumer, you’re hardly paying attention to the ownership of the company — if it talks like Amazon, walks like Amazon, then it’s probably Amazon.

Unfortunately, that’s not quite the case.

Under the law, these companies are barred from selling any products directly. That means they have to set up local companies to be able to sell all the products we see on the site — that includes everything from books, groceries to electronics — not just the Echo etc.

Kishore Biyani, owner of the Future Group, told local media that a move like this would force the e-commerce companies to become ‘genuine marketplaces’. But, experts argue that it’s going to be the customer that’s ultimately going to suffer because traditional Indian sellers aren’t in a position to offer a customers an experience that’s at par with what e-commerce companies were able to accomplish. Some have even termed the new regulations as being ‘regressive’.

But, there’s still a loophole. Flipkart and Amazon can still buy whatever they want to buy, and buy as much as they want to buy. Since they can’t sell to consumers — they can sell the products to their affiliates. Now, the affiliates can’t sell on the platform either — but they can sell to other companies, or directly to consumers in some way, at whatever price they want.

The impact of the new regulations will only play out once the deadline of February 1, 2019 hits. As of now Amazon and Flipkart have stated that they’re still evaluating the new regulations.

The Indian government seems to have a taken a turn from rolling out the red carpet for foreign investors, to pulling it out from under their feet — at the behest of protests put up by the local retailers.

See also:
Indian government tightens rules: E-tailers like Flipkart and Amazon won't be allowed to sell products by companies they back

Amazon wants to sell insurance policies to Indians

Clash of the titans: Amazon, Walmart and Alibaba to battle it out in India