Disruption ahead: No deadline extension for Amazon, Flipkart

Amazon and Walmart-owned Flipkart, who were counting on the Indian government to extend the February 1 deadline for implementation of the new foreign direct investment (FDI) norms in e-Commerce, were in for a rude shock on Thursday evening. The Department of Industrial Policy and Promotion (DIPP) put out a press note that said, “After due consideration, it has been decided, with the approval of the competent authority, not to extend the deadline.”

The new norms will have a major impact on Amazon and Flipkart, including a restructuring of their business models. Many products have already been pulled out of their websites. The new regulations prevent them from having exclusive sales, vendors from selling products on marketplaces of their investors, and marketplace entities from exercising control on the seller’s inventory.

Some products that weren’t available on Amazon India on Friday morning are now available through other sellers, but with a waiting period ranging from a fortnight to a month. Cloudtail India Pvt. Ltd, a joint venture of Amazon.com, Inc. and Infosys co-founder. Narayana Murthy’s Catamaran Ventures, had posted a 27% revenue growth for 2017-18. It was until now the largest seller on Amazon India’s platform, reporting a revenue of Rs 7,149.21 crore, compared to Rs 5,631.33 crore in the year-ago period, according to business intelligence platform Paper.vc.

Local trader groups, a major vote-bank for the ruling party, celebrated the move even as analysts said consumers would bear the brunt too as they will have to shell out more and have less products to choose from. Brian Olsavsky, CFO of Amazon, said the company feels positive about the long-term prospects in India, but they are not sure if the latest move is “consistent with better price, better selection, better convenience for the Indian customer.”

Ankur Pahwa, partner and national leader in EY India’s e-commerce and consumer internet, said, “There will definitely be a short-term disruption in the e-commerce ecosystem, which will affect customer experience, sales and cash burn.” He said the ecosystem will evolve to reinvent the already intricate supply chain that exists for e-commerce players in India.

Mukesh Ambani's Reliance, which is entering the e-commerce sector soon, is touted to be a game changer, with some even saying that it could be the Alibaba of India.