When Amazon balks, you’ve gotta back down.
That seems to be what happened in India, where proposed e-commerce policy changes that threatened Amazon’s growing digital business in the nation of 1.4 billion were quickly abandoned after the Seattle-based retailer, along with Walmart-backed rival Flipkart, announced its intention to fight the government over the controversial new rules that could have stymied growth and halted expansion plans.
Late in December India announced the draft proposal that contained a clause that would have prohibited e-commerce giants from selling their own private-label brands on their platforms. That means Amazon wouldn’t be able to sell Alexa-powered devices or any of its private-label apparel brands, for example.
Notably, brick-and-mortar shops in India aren’t hobbled by similar restrictions and some detractors alleged the policy update was merely populist pandering ahead of upcoming elections in March and April.
The proposed changes not only targeted e-commerce but also took aim at the very essence of foreign direct investments (FDI) in India, potentially derailing Amazon’s deal for a 10 percent stake in Future Retail that affords access to hundreds of stores across the country. After rising 32 percent between Oct. 8 and Dec. 24, shares in Future Retail dipped 11 percent after news of the proposed FDI e-commerce amendments broke, India’s Business Standard reported.
Critics took issue with the draft proposal’s vague wording.
“Several points in the (new) policy are nonsensical, if I may say so. What is deep discounting—is 50 percent discounting deep and 30 percent not deep? And what is meant by the point that every seller must get equal treatment? This goes against the very tenant of commerce. Each supplier and buyer have preferential relationships based on strategic reasons,” Arvind Singhal, founder of consumer products and retail sector consultancy Technopak, told the Business Standard.
Plus, the proposal failed to stipulate how the new rules would be enforced. “Without a penalty, and details regarding a mechanism on how such cases will be taken up and tried, it’s hard to see how there will be a meaningful change,” an unnamed source told the Business Standard.
Amazon India is a bright spot even within a company among the leaders of global e-commerce. Based on SimilarWeb data, more than half of India’s online shoppers purchased during the three sales Amazon India held throughout the festive season from Oct. 10 through Nov. 5. The company said consumables and Amazon Fashion, India’s largest online fashion store, led the top-selling categories. The latter attracted the most new customers and notched 100 percent year-on-year growth—a positive development for Amazon’s ambitions to become a fashion destination. Investments in private labels paid off as Amazon India reported a six-fold year-on-year improvement in own-brand performance.
Amazon India hired 50,000 seasonal associates to staff its national network of fulfillment centers to meet elevated festive-season demand.