Amazon, Flipkart Face Indian Traders' Wrath
India's wholesale and small merchants are up in arms in huge protests against e-commerce giants, Amazon and Flipkart. In the center of Delhi's Sadar Bazaar traffic circle, several shopkeepers in Delhi staged a 'sit-in' protest. The wholesale bazaar merchants held placards of Amazon and Flipkart, demanding they 'go back'. The 'sit-in' was chaotic, what with auto drivers, rickshaws, motor cycles and ox carts plying the market road, in a state of utter confusion.
The tirade was against Amazon.com Inc and Walmart Inc.,owner of the local e-commerce leader, Flipkart. India's shopkeepers are mobilizing protests against these e-commerce giants, accusing them of engaging in predatory pricing, and thus violating rules that are meant to protect local merchants. The protests were carried out across different regions across the country.
According to the shopkeepers, Amazon and Flipkart were the 'second coming' of the East India Company, a British Trading House who set foot in India, only to establish colonial rule in the country for more than 200 years. According to National Secretary of the Confederation of All India Traders, the two global e-commerce giants were not engaging in business, but were trying to monopolize and control.
In response, Amazon and Walmart said they were operating in compliance with Indian laws, and that they only acted as a third-party market-place. While Amazon said their sellers had complete discretion at what price to sell their products, Flipkart said it provides data to sellers to help them determine what product offerings will sell at what price, but sellers made the final decision.
Both global giants have a huge stake in their retail business in India, having sunk billions of dollars trying to crack the market and capture it's growth potential.The country has 1.3 billion consumers and both e-commerce giants have a lot at stake here.
Walmart's acquisition of Flipkart threw the foreign companies into chaos and analysts began questioning their investments in India. Amazon was finally shut out of China and Walmart's e-commerce performance in the United States has been mixed. Both companies decided to focus on the Indian market.
Meanwhile, India's traders and merchants are facing a slowing economy, with consumer demand that has been threatening to be all, but existent. The economy is at it's slowest in six years. About 70 million small merchants collectively control 90 per cent of the retail market across India. The Indian shopkeeper's union has shown to be a major political force. They constitute an important part of the voter base of Prime Minister Narendra Modi's Bharatiya Janata Party.
A central government with this kind of support would do well not to ignore their demands. It would politically not be advisable to do so. The shopkeepers recently scored a major victory over the e-commerce giants when the government tightened regulations on how such platforms should sell their products. The rules aimed at playing a level field, and forced both Amazon and Walmart to remove several products from their shelves and restructure a large part of their operations.
The shopkeepers allege that both Amazon and Walmart are circumventing the rules with predatory pricing and huge discounts. The main occurrence was in the Diwali festival, when shopkeepers saw a significant reduction in Diwali sales by 60 per cent. However Amazon and Flipkart recorded huge revenues, leading shopkeepers to argue that the selling in the six-day festival period was a violation of new rules.
The shopkeepers said that selling products cheaper only resulted in retail sector losses. A government official said that the policy makers were looking at setting up a dedicated e-commerce regulator. Shopkeepers and traders are fearful that if online selling cuts into their domain in a significant manner with e-commerce giants indulging in predatory pricing, no one would visit the market or their shops. Many of the businesses have either shrunk or have closed down.