India Curbs Power of Amazon and Walmart to Sell Products Online

The Indian government dealt a surprise blow Wednesday to the e-commerce ambitions of Amazon and Walmart, effectively barring the American companies from selling products supplied by affiliated companies on their Indian shopping sites and from offering their customers special discounts or exclusive products.

If strictly interpreted, the new policies could force significant changes in India strategies for the retail giants. Amazon might have to stop competing with independent sellers and end its offerings of proprietary products like its Echo smart speakers in India, its top emerging market.

For Walmart, which spent $16 billion this year to buy 77 percent of Flipkart, India’s leading online retailer, the new rules could hamper its strategy of selling clothing and other products under its own private brands and prevent it from using its supply-chain expertise and clout with retailers to drive down prices for Indian consumers.

Representatives for Amazon and Flipkart in India declined to comment on the new rules, saying the companies were still assessing them. The government posted the changes, which go into effect Feb. 1, without warning Wednesday evening in New Delhi, while much of the business world in both countries was on vacation.

“Ultimately, the customer is going to suffer because Indian sellers are not at the scale where they can provide a good experience to customers,” said Satish Meena, a senior forecaster in New Delhi for Forrester, a global technology research firm. “This is a very regressive strategy by the government.”

Prime Minister Narendra Modi of India initially courted foreign companies to invest more in the country after his 2014 election victory, but his administration has turned protectionist as his party’s re-election prospects have dimmed in recent months. Modi has increasingly sought to bolster Indian firms and curb foreign ones through new policies.

The new e-commerce rules seemed to be an attempt by Modi to placate small traders, who have been hurt by his tax and financial policies, before national elections in May, analysts said. The changes would also help Paytm, a local payments company that operates a digital mall, and Reliance Industries, an Indian conglomerate with online retail ambitions that is controlled by Mukesh Ambani, India’s richest man and a political patron of Modi.

c.2018 New York Times News Service