Online shopping has taken a hit because the Indian government has changed its rules for companies like Amazon and Flipkart. What has brought about the change in e-commerce policies, that too just a few months before India goes into General Elections?
Industry experts believe that appeasing local sellers will be on top of the ruling government’s agenda before the voting countdown begins. Sure, but for consumers this means Amazon and Flipkart will have less (or no control) over sellers and even delivery firms on their platform.
That’s not all, you’ll have to bear with a fall in the amount of cashbacks for every item purchased from these sites. Even discounts are going to take a hit, at least in the short term, according to industry experts we spoke with.
It’s easy to forget that other than Amazon and Walmart (with Flipkart), there’s also Paytm Mall which will be hindered by the changes in the e-commerce regulations. After all, Paytm Mall has Alibaba to bank on and this means, all the cashbacks and heavy discounts it has been able to offer will reduce at least in the short term.
Online shoppers will have to contend with reduced selection, higher prices and disrupted customer experience while sellers will be unable to source wholesale merchandise at scale as e-commerce players come to terms with the changesSanchit Vir Gogia, Chief Analyst, Greyhound Research
With Paytm Mall confirming the decision to push cashbacks to physical stores, rather than online purchases, the strategy change is already making its presence felt for the company, with a drop in online sales, as reported by Economic Times
Sanchit, however, thinks that Paytm Mall is more focused as a marketplace than Amazon and Flipkart, and not being able to lure buyers with attractive discounts could hit its business.
Because of its marketplace model, Paytm has found it hard to make sure the sellers maintain quality and fulfillment response is also lacking.Sanchit Vir Gogia, Chief Analyst, Greyhound Research
Everybody knows that with a marketplace model, e-tailers were offering cashback and discounts out of the money they saved by relying on internal resources for packaging and delivery. This regulation changes everything.
All this to Appease Local Sellers
He also says the government is not exactly discouraging investment, but wants tighter control for the sake of local sellers. Also, it’s not like the regulations have been created overnight. They have been there much before it came into the news. It's just the decision to adopt it, less than 100 days before the elections, without any plea for extension being considered, has come as a jolt to the global giants.
He adds that while it’s easy to criticise the government for this decision, someone needed to put a check on the sort of business Amazon was running in the country.
Over the years, we’ve seen in the United States, how big the company has become, operating in everything from cloud (AWS) to offline grocery (after buying Whole Foods).
If indeed the effort was to bring a level-playing field for the local retailers, all would have been forgiven, but experts think the ground has been laid open for two other big local players to enter the fray. They think with Mukesh Ambani, chairman, Reliance Industries and even Kishore Biyani, CEO, Future Group, having heavily invested in offline assets, these rules will play right into their hands.
The tighter rules, aimed at protecting small traders, may end up benefiting the country’s richest man, Mukesh Ambani, who is building a home-grown competitor.Sanchit Vir Gogia, Chief Analyst, Greyhound Research
So, there you have it. The timing of the regulations change just to keep local sellers happy seems strategic. It’s hard to deny its relation with the upcoming elections in the country a few months from now. At the end, as always, consumers will have to bear the brunt of the changes, while companies look to circumvent the FDI rules without breaking the law.
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