Indian e-Retail Giant Flipkart Warns About Disruptions from Proposed Government Regulations

Indian e-commerce giant Walmart has warned the country’s government that there would be ‘significant customer disruption’ if the new e-commerce curbs are implemented as planned. Kalyan Krishnamurthy, the Chief Executive of Flipkart, stated in a letter to India’s industries ministry that if the implementation is not delayed by at least 6 months to avoid major disruptions.

India has witnessed unprecedented growth in the e-commerce industry over the past half a decade, and it was no surprise when retail giant Walmart acquired Flipkart for a jaw-dropping $16 billion last year. The country’s new e-commerce regulations go into effect from the 1st of February and could be a major problem for most e-commerce majors, including Amazon India.

According to the new set of regulations that are going to come into effect, e-commerce companies can no longer sell products for sellers in whose businesses they own a stake. However, what has come as a particularly hard shock for many e-commerce majors is that, under the new regulations, they would no longer be able to reach exclusive selling rights for a product from a particular seller. The latter is primarily used by mobile phone companies when they launch a new smartphone.

In the letter above, Krishnamurthy wrote, “Redesigning numerous elements of our technology systems to ensure that we can validate and evidence our compliance, in such a compressed period, has caused us to divert significant resources.” According to the sources in the Indian e-commerce industry, the new regulations are going to raise costs significantly and more importantly, leaders like Flipkart and Amazon might need to realign their business practices in the country completely. All of that is bound to cause some disruption for the e-commerce companies, the sellers and the ultimate consumers.

However, what could be even more concerning for many stakeholders at the global level is what it means for future Foreign Direct Investment in India. Following Walmart’s massive bet, the new regulations could alter the very nut and bolts of the business. Flipkart’s Chief Executive said much in his letter, stating that the regulation “imposes several new conditions, which we believe could potentially have undesirable impacts on the continued growth of e-commerce in India.” It must be noted that India’s small traders had complained that the pricing practices of these companies, due to the sort of control they had over the inventory, creates an unfair market.

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