India is currently the eighth largest market for the global e-commerce sector with a growth of 26 per cent in 2021, that was crucial for the industry’s 15 per cent growth. As a key market for the world’s largest e-commerce platform Amazon, Indian consumers have almost 170 million products to choose from on the site. But it seems that Amazon is now wrapping up its business in the country, since it’s now closing down wholesale distribution, after food delivery and edtech.
The firm which has invested $7 billion in India may stick to online retail and OTT, since it has shut the wholesale business, which catered to kirana stores in Bengaluru, Mysore and Hubli. Amazon pulling out of new ventures, including one which could thrive from the network of Kirana stores in India, can be attributed to a pushback from local traders and policymakers.
Tussle with CAIT and competition watchdog probe:
India’s main traders’ body CAIT has approached the Competition Commission of India against Amazon and Walmart owned Flipkart on multiple occasions. It had urged the commerce minister Piyush Goyal to bar Amazon from operating in India and accused it of fraud for not revealing its strategic holdings in the Future Group. Amazon had also been slapped with a Rs 202 crore fine by CCI for hiding the details of the deal.
The CAIT has also approached the CCI more recently, against a bid by Amazon to acquire the Aditya Birla Group’s chain of retail stores, More.
Facing state-backed competition
Amazon and its rival Flipkart thrive as marketplaces that provide exclusive online reach for vendors listing their products on the site. This had created a duopoly of sorts in India’s e-commerce market, and Infosys co-founder Nandan Nilekani has helped design an alternative, supported by the government.
The Indian state has launched an Open Network Digital Commerce system, which allows store owners or small vendors, to market their products across different platforms. This breaks the hegemony that Amazon and Flipkart enjoyed as dominant online marketplaces, and gave kirana stores direct access to online consumers, and a larger customer-base as well.
Locking horns with India’s biggest conglomerate
Amazon’s deal with Future Group has not just faced opposition from CAIT, but has also brought it face to face with Mukesh Ambani’s Reliance Industries in a bitter legal battle. The agreement with Amazon bars Future Group from selling assets to Reliance, and this disrupted the oil to telecom conglomerate’s takeover of the Big Bazaar parent firm.
Outside the court, Amazon’s short-lived outreach towards Kirana store owners faced competition from Reliance’s Jio, which has now started registrations for its Jio Kirana franchise, backed by WhatsApp’s network.
These are some of the factors making it hard for Amazon to operate in India, apart from Union Minister’s attack on Amazon and Flipkart, accusing the e-commerce giants of hurting local businesses and promising social media-like norms against them.
