Foreign retailers pull thousands of products off virtual shelves in India
India’s new foreign direct investment (FDI) policy has come into effect, and in doing so, has caused international players Amazon and Walmart-owned Flipkart to pull down hundreds of thousands of products from their respective online stores.
The policy change means e-commerce firms in India are no longer able to sell products via companies in which they have an equity interest, or to push sellers to exclusively sell on their platform, significantly impacting the business of both international players.
Both Amazon and Flipkart requested a six-month extension to the introduction of the policy in order to avoid the sudden and significant impact the change were sure to have, however the Indian Government opted to go ahead with its decision.
The two businesses lost a combined US$50 billion of share value as the policy came into effect on February 1.
According to Quartz, many of the goods pulled from Amazon were sold by various joint ventures the business is involved in, including Cloudtail – reportedly Amazon’s biggest seller, generating up to 40 per cent of the company’s sales in certain months.
“Our main concern is to try and minimise the impact to our customers and sellers in India,” Amazon chief financial officer Brian Olsavsky said on a conference call according to The Times of India.
“We have built our business around price, selection and convenience. We don’t think the changes help in those dimensions for both customers and sellers in India.”
According to a draft PwC report seen by Reuters, the restrictions could reduce online sales in the region by US$46 billion by 2022, derailing investment plans and forcing international businesses to implement more complex business structures, and could lead to the creation of 1.1 million fewer jobs.
The rules have been seen as an attempt by Indian Prime Minister Narendra Modi’s government to return some power to local players, small traders and shopkeepers, and to limit international players ability to dominate the burgeoning Indian market.