Amazon.com and Walmart's grand plans for India were thrown into chaos on Friday after the country implemented new e-commerce regulations that could cut their growth in the market by as much as half this year.
Prime Minister Narendra Modi's government tightened rules for the retail giants after complaints from domestic sellers. Amazon and Walmart's Flipkart are now banned from cutting exclusive arrangements with sellers, offering deep discounts or holding any business interest in online merchants.
Thousands of products have already vanished from the virtual shelves of the duo, which together account for 70% of India's online retail market. Arvind Singhal of consultancy Technopak Advisors estimates their revenue growth could fall to 15% in coming months from 25% to 30% previously.
Amazon's shares slid as analysts pushed the company for answers on India, a market it regards as the best for international expansion. Jeff Bezos has pledged to spend $5.5bn there in pursuit of growth, but executives had few encouraging words, saying the effects of new regulations are still uncertain.
"It will be at least six to eight months before they are able to find workarounds and restore listings," said Singhal, the New Delhi-based chair of Technopak.
The disruption comes after the two retailing giants wagered billions on the market: beyond Amazon's spending pledge, Walmart shelled out $16bn to buy control of Flipkart.
Walmart and Amazon have amassed vast inventories and had sought a four- to six-month extension to help offload those products. But the decision to go forward with the new rules was announced on Thursday evening.
The new rules could wipe out nearly half the products on Amazon, said Satish Meena, an analyst at Forrester Research.
Walmart's and Amazon's tactics have been controversial in India where organised retail accounts for only about 10%, and the market is dominated by small sellers and mom-and-pop stores. The government's decision on the e-commerce rules comes months ahead of a crucial general election. Small traders have traditionally been part of a support base for Modi's ruling Bharatiya Janata Party.
Bloomberg..