Categories Technology

Indian govt delivers Amazon, Flipkart a rude shock with new e-comm rule

India was perceived as a fertile ground for e-commerce growth by both Amazon (AMZN) and Walmart-owned local rival Flipkart, both of which had made heavy investments in the country. But the government on Thursday announced a new set of rules that could put these companies in a dilemma.

The latest notification by the Commerce Department bars e-commerce companies from selling to firms where they have a stake. This comes as a spoiler to e-commerce majors who had been using B2B firms as intermediaries to sell products at a discounted rate.

amazon vs walmart india
Photo by Piotr Cichosz on Unsplash

It may be noted that the Indian government does not allow foreign companies to sell directly on the e-commerce platforms.

The latest notification also bans online shopping sites from “forcing” exclusive deals with sellers, though sellers may choose to distribute their products through a specific platform alone. This, in turn, leads to the end of an era of flash sales, which had been a profitable marketing strategy for many online shops.

Cashback offers will also become a difficult proposition in terms of wallet services and logistics, given they need to be uniform among all vendors. Analysts feel that these new rules, to be made effective from February 1, will decimate the business models built by e-commerce companies over the past five years.

Amazon sells more items than ever before this holiday season

The move has been spurred by an outcry by brick-and-mortar stores, who had been accusing online shopping platforms of offering cut-throat discounts.

The smaller e-commerce companies, which had been disputing the preferential treatment that was offered to bigger rivals, have something to cheer about. Snapdeal, a small player that competes with Flipkart and Amazon, welcomed the move saying it created a level playing field in the e-commerce industry.

Also Read:  SurveyMonkey jumps about 60% after upsized market debut


Get access to timely and accurate verbatim transcripts that are published within hours of the event

Most Popular

Chewy (CHWY) stock drops after reporting Q4 earnings; FY20 forecast not given

Online pet food seller Chewy Inc.'s (NYSE: CHWY) bottom line beat the market's estimates, while sales met the targets in the fourth quarter of 2019. The company posted a loss

Ford (F) got hit by COVID-19 and here’s why a recovery will not be easy

Ford Motor Company (NYSE: F) reported a 12.5% decline in total US vehicle sales for the first quarter of 2020. The sales numbers were heavily impacted by the coronavirus outbreak

US unemployment claims double to 6.6 million in a week; stocks fall

After climbing to a record high a week ago, jobless claims in the US more than doubled and reached unprecedented levels in the week ended March 28 as more and