In its latest worries that have kept the online retailers tensed, the Walmart Inc's Flipkart has expressed the risks that await the company, to the Indian government. The major one being “significant customer disruption” is set to disturb businesses across the country of the implementation if new curbs for e-commerce are not delayed by six months.
The new foreign investments to be applicable from February 1 in India will put a bar on e-commerce companies from selling products from firms in which they share an equity interest. It would also put a ban on them from reaching deals with sellers in order to sell only on one platform.
The India's Industries department has been addressed in a letter earlier that the rules required the companies to assess all elements of their business operations. The new curbs being announced on December 26, has left the retailers with very little time to redesign numerous elements of their technology systems so that they can validate and evidence their compliance. It has also pressurized them to divert their significant resources.
These regulations are ought to cause significant customer disruption if the deadline for compliance isn’t extended now. A six-month delay is what has been asked for by the online retailers.
On the other hand, the government is in no mood to change the implementation date of the policy, as per the Indian official sources. The policy move has shunned major retailers like Walmart and Amazon. Walmart has invested $16 billion (12.16 billion pounds) in Flipkart last year which is reported to be its biggest ever deal and it has now started feeling the tremors of this regulation. Amazon too has committed $5.5 billion in Indian investments and it is also feeling insecure.
The new policy is being feared because it would raise compliance costs and would force Amazon and Flipkart to review their business arrangements in India. Though both Amazon and Flipkart seek a deadline extension, yet they have already initiated the work of approaching thousands of sellers on their platforms. This is to ensure that their companies comply with the regulations.
This entire process would however take around five to six months for Flipkart as it is at the moment aiming to work with sellers to get compliance and for the while; other businesses have been set aside.
There had been continuous complaints from the small traders of Indian market that the large e-commerce companies used their control over inventory from their affiliates. This they did to make an unfair marketplace so that they could offer deep discounts on some products. The new policy would ban such arrangements in future.
Amazon seeks an extension of four months and it has written to the Indian government regarding the same. Amazon requires time to understand the policy considering its hundreds of thousands of transactions and more than 400,000 sellers.
Flipkart group has more than 80,000 employees and contractors and its daily shipments and packages range from 500,000 and 600,000.
The new policy is set to impose several regulations which are speculated to have undesirable impacts on the sustained growth of e-commerce in India.
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