New India eCommerce Rules Spur Amazon To Remove Some Items

In India, the new eCommerce rules have taken shape, and are now official — with none of the delay that retailing giants Amazon and Walmart had desired.

To that end, Amazon has been partly de-stocking its virtual shelves in the country. As has been reported by several sites, among them Reuters, the company has been removing those items as a shift in foreign direct investment rules means companies cannot sell products through vendors in which they have ownership. In addition, Amazon and Walmart (which owns about 77 percent of Flipkart) cannot ink deals with vendors to sell items exclusively through those firms’ eCommerce platforms.

The new rules took effect on Feb. 1. The effect has been swiftly realized for Amazon, where for example it owns 5 percent of an Indian department store chain known as Shopper’s Stop — and thus clothing is now no longer available via Amazon. Also missing are a range of consumer electronics items, such as Echo speakers and batteries … and chargers that power any number of items, too, across the Amazon Basics line, as had been previously sold through eCommerce sites such as Cloudtail, where Amazon also has an equity stake (albeit an indirect one). Other items that are vanishing from consideration include sunglasses, household items and Amazon’s grocery offerings through Pantry.

At least some of the goods have shifted, in a sense, to new avenues. The newswire noted that, for instance, Echo smart speakers were up for sale via other Amazon sellers. But the lead time is a long one, as delivery may stretch out for longer than 35 days, compared to delivery done through Amazon Prime, where customers can receive their purchased goods in as little as two days.

The changes come as Amazon has stated that it will spend $5.5 billion in the country, focused on eCommerce. As CFO Brian Olsavsky said of Amazon and India, “the situation … is a bit fluid.” Flipkart has said that there will be “customer disruption” in the wake of the new rules.

Amazon’s move to comply with the new regulation — and Flipkart’s own statement that it will do so — has been cheered by some smaller firms. It’s a sizable group, and those firms number as many as 25 million business owners, who brought complaints against the company and lobbied the government for the new rules.

The Confederation of All India Traders said in a statement that it takes “deep satisfaction” in the new rules, as they represent “a strong step to clean the greatly vitiated eCommerce market” in the country. But might there be even more changes in the eCommerce arena? The same group has been pushing for a “special investigation team” and a new watchdog to help shape and govern the sector.

As we noted in this space in recent days, the latest back-and-forth over eCommerce has included the word “bilateral” — according to commentary by some observers as to what the U.S. might do in the wake of the new rules.

Reuters  reported recently that the U.S. government has illuminated the “good relations” between India and the U.S. The government has also said that American companies should be given “concessions in the larger interest of bilateral trade,” and the newswire said that India gave a “non-committal” response.

In the meantime, hundreds of thousands of products are disappearing from virtual shelves, and those that are re-appearing — in Amazon’s case — will not reach shoppers for weeks. Hardly the stuff of which happy consumer experiences are made.  And it shows that unintended consequences accrue when regulators look to legislate digital commerce, this time to the dissatisfaction of many.