The year 2018 does not seem to be ending on a very good note for electronic commerce companies operating in India. The government of India announced new rules for ecommerce companies that bans them from selling products from companies in which they have an equity interest. The new rule is likely to affect online giants such as Walmart owned Flipkart and Amazon in addition to other players such as Snapdeal.
The government has also debarred online commerce companies into entering exclusive agreements with sellers. This comes after a series of exclusive ecommerce platform launches especially in the case of smartphone segment – the most recent one being the exclusive launch and sale of Mi phones online. The new rule will bring an end to the era of “Flipkart exclusive” and “Amazon exclusive” tags on smartphone and other product launches.
The Indian government’s new rule stops online companies from selling their own goods on their platforms, and also puts a halt on deep discount offers and cashback schemes offered by them.
The move comes after a series of complaints by offline retailers who have reported a significant downfall in their business due to competition from ecommerce players like Flipkart and Amazon.
Effect on Flipkart and Amazon
While Walmart has 81.33% stake in Flipkart, Amazon has purchased a 9.55% stake in Future Retail (Brand that owns Big Bazaar) in November this year. The government’s move is a big jolt for Amazon as the company has been selling Big Bazaar products through its venture “Amazon Prime Now.” Additionally, both Amazon and Flipkart have been actively pushing their own brands on their ecommerce platforms. Amazon’s pulses and grains food brand Vedaka, and Flipkart’s Supermart Select sugar are some of the brands which are expected to disappear from their own platforms.
Date of Implementation of New Rules
The new rules are to be implemented from February 1, 2019 onward.