Indian retailers target Amazon, Walmart
SHOPKEEPERS WANT GOVERNMENT TO REIN IN PREDATORY PRICING OF THE E-COMMERCE GIANTS
In the heart of New Delhi’s largest wholesale bazaar, merchants who normally compete with each other have united against a common enemy.
“Amazon, Flipkart!” one merchant after another shouts into a microphone from a small stage in Sadar Bazaar’s central traffic circle. Some 50 other shopkeepers gathered around shout back in unison: “Go back! Go back!”
The sit-in, which created more chaos than usual among the rickshaws, motorbikes and ox-carts plying the market road, was one of as many as 700 protests against Amazon.com Inc. and Walmart Inc. — owner of local e-commerce leader Flipkart — that organisers say took place at bazaars across India on a recent Wednesday.
Violation of rules
India’s shopkeepers are mobilising against the global ecommerce giants, alleging they are engaged in predatory pricing in violation of new rules meant to protect local businesses. At stake is the future of retailing in a country with 1.3 billion consumers, where Walmart and Amazon have sunk billions of dollars trying to crack the market and capture its growth potential.
“Amazon and Flipkart are a second version of the East India company,” said Praveen Khandelwal, national secretary of the Confederation of All India Traders at the Delhi protest, referring to the British trading house whose arrival in India kicked off nearly 200 years of colonial rule. “The motive of Amazon and Flipkart is not to do business, but to monopolise and control.”
India’s government in October announced an investigation into the allegations of predatory pricing. Amazon and Walmart said in statements to Bloomberg News last week that their operations comply with Indian laws, and that they act only as a third-party marketplace.
The conflict comes amid a broader global backlash against the breakneck expansion of tech firms.
India’s slowing economy — it expanded at the slowest pace in more than six years last quarter — and the accompanying consumption slowdown has worsened the pain of these neighbourhood stores.
Worsening Pain
Representing about 70 million small merchants who collectively control almost 90 per cent of India’s retail trade, India’s shopkeepers union has shown itself to be a strong political force. The traders are an important part of the voter base of Prime Minister Narendra Modi’s Bharatiya Janata Party.
“For a government, especially a government of the BJP, which has the support of small businessmen, it may not be prudent or politically advisable to totally ignore such demands,” said Sandeep Shastri, a political scientist at Jain University in Bengaluru. “They would have to be seen taking some steps at least.”
The union’s power is a significant reason the government has placed such onerous restrictions on foreign retailers — including a minimum $100 million investment and strict local sourcing rules. Because of the hurdles, the likes of Walmart and Carrefour SA have all but given up on opening their eponymous stores in the country.
The shopkeepers won a key victory against the foreign ecommerce players last year when the government tightened regulations on how the platforms are allowed to sell goods.
The rules, aimed at creating a level playing field on pricing, forced Amazon and Flipkart to pull thousands of items from their virtual shelves and restructure large parts of their local operations.
The changes, coming after Walmart announced its acquisition of Flipkart, threw the foreign companies into chaos and prompted analysts to question their India investments. With Amazon shut out of China and Walmart’s e-commerce performance in the US decidedly mixed, both companies have settled on India as key to growth.
Amazon CEO Jeff Bezos has pledged to spend $5.5 billion to win India, while Walmart’s $16 billion Flipkart deal was the retailer’s biggest ever.
Now the shopkeepers are alleging Amazon and Flipkart are circumventing the rules with predatory pricing and deep discounting. They are demanding the government shut down the companies’ online marketplaces until they are in compliance.
Amazon said its sellers have complete discretion on what price to sell their products. Flipkart said it provides sellers with data to help determine what product offerings will sell best at what price, but business decisions are ultimately the sellers’ to make.