Tuesday, May 21, 2019

Indian e-commerce new rules will affect Amazon sales

The new e-commerce regulations in India will come into effect next month and are expected to limit the investment e-commerce sector such as Flipkart owned by Amazon and Wal-Mart. According to a recent analysis released by Price water house Coopers Global Advisors, this regulation will lead to online sales in India in 2022. Reduced by 46 billion.

According to the new regulations, e-commerce companies operating in India will not be able to sell the products of their holding companies from February 1st, prohibiting e-commerce companies from selling exclusively on the platform.

This rule was announced in December last year, and only a few months away from India’s May elections this year, it is also considered to be the political means by which the Indian government’s government team, Narendra Modi’s government, tried to appease millions of small traders and shopkeepers. This group of people is the key voter base, and they say their companies have been threatened by online retailers around the world.

Industry sources told Reuters that the introduction of this policy would cause some investment plans to be postponed or failed, and companies such as Amazon and Flipkart had to create new and more complex business structures.

According to Baiyun.com, if e-commerce companies change their business models to meet the new policy requirements, India's online retail sales growth, taxation and employment opportunities will be severely hit.

To be sure, online sales will continue to grow, but the growth will be lower than expected before the policy change.

Online retailers typically use the total merchandise value (GMV) of monthly online sales to measure performance because they typically receive commissions from sellers to make money.

The analysis also said that by March 2022, India's policies could lead to a reduction of 1.1 million in new jobs than previously expected, and could also result in a tax reduction of $6 billion.

Both Amazon and Flipkart are making the final effort, hoping to postpone the original February 1 deadline, but sources from the Indian Ministry of Commerce told Reuters that the Indian government is unlikely to agree.

Amazon said in a statement that it still "strives to comply with all local laws," but has asked the government to extend it for four months.

According to sources, Flipkart has filed a six-month extension. The company said to the Economic Times of India that it believes that "extension is appropriate" to ensure compliance with all the elements of the policy.

After the Reuters news release, the Federation of Indian Merchants (CAIT) issued a statement saying it disagreed with PwC's analysis. CAIT has expressed support for a more rigorous review of large e-commerce companies, saying their pricing is predatory and hurts smaller businesses.