In uprising against Amazon, Indian traders want it banned, fairplay for e-commerce

25, Feb. 2021

A worker pushing goods at an Amazon fulfilment center in India (Photo courtesy of Amazon)
A worker pushing goods at an Amazon fulfilment center in India (Photo courtesy of Amazon)

By Atul Ranjan

NEW DELHI, NNA - Local retail associations in India are up in arms again about alleged discriminatory practices by foreign e-commerce players which seem to favor a minority of big sellers rather than helping the millions of small businesses.

The associations, which have long been demanding stricter regulations or even a ban on foreign-funded platforms like Amazon and Walmart's Flipkart, have raised a ruckus over revelations by Reuters last week that the Indian unit of Amazon had helped a small number of sellers prosper on its India platform by giving them discounted fees and helping one of them seal special deals with big tech companies such as Apple Inc.

According to documents seen by Reuters, it said in a report that Amazon also wielded significant control over the inventory of some of the biggest sellers on its platform, even though the American giant claims otherwise that all its sellers operate independently.

Praveen Khandelwal, secretary general of the Confederation of All India Traders (CAIT), said at a press conference on Feb. 18, "The shocking revelations about Amazon’s strategy to dodge the laws of India are sufficient enough to immediately ban operations of Amazon in India."

The association, which is also contemplating legal action, says it represents 80.5 million offline traders and 40,000 trade associations.

It is organizing a nationwide protest on Feb. 26, to call the government to ban Amazon and tighten foreign direct investment regulations to prevent foreign companies from circumventing rules and taking advantage of loopholes.

In its report last week, Reuters revealed that 35 of Amazon India’s more than 400,000 sellers dominated about two-thirds of sales in early 2019. The big players from the small minority included those in which Amazon had indirect equity stakes, it said.

Amazon has denied all allegations, slamming the Reuters report as “unsubstantiated, incomplete, factually incorrect.”

In a letter to the country's commerce minister Piyush Goyal, CAIT alleged that big sellers with links to Amazon India together control around 80 percent of business on the platform.

“Though, according to law and policies, the marketplace (Amazon) should not have relation or control over the retailer (online sellers), some of these retail companies are fully controlled by Amazon. Thus, Amazon’s ‘marketplace’ narrative is a mere myth,” it said in the letter.

Under the country's foreign direct investment rules, an e-commerce platform should "not exercise ownership" over seller inventory, and the inventory of a vendor will be deemed to be controlled by the platform if more than 25 percent of purchases received by such vendors come from the marketplace entity or its group companies.

The growing anger against e-commerce giants has become even louder when the All India Mobile Retailers Association (AIMRA) sent a letter on Feb. 21 to Samsung accusing it of giving preferential treatment to e-commerce companies.

AIMRA, which represents over 150,000 mobile retailers in the country, alleged that Samsung had deliberately chosen to supply the latest Samsung Galaxy F62 and other smartphone models to e-commerce players while ignoring the small offline retailers.

AIMRA said it deems such a move illegal and not helpful to retailers going through their toughest time ever, pointing out that thousands of shops had already shut down after having been hit hard by the pandemic crisis while many more are facing closure or an uncertain future.

Meanwhile, smaller sellers on the platforms of e-commerce giants have aired their grievances too as they hit out against Amazon and Flipkart for their unfair practices.

The All India Online Vendors Association, whose members sell goods on the two marketplaces, has urged the country’s anti-competition watchdog, the Competition Commission of India (CCI), to take action against the two.

A senior member of the association told NNA on condition of anonymity that the revelation by Reuters was nothing new as the government and regulators had all along been aware of the issues.

The association has been demanding a complete transparency in the e-commerce businesses in terms of pricing and discounts, among other things. It also wants the government to include the association in the e-commerce policy body when formulating rules.

“We have sent hundreds of proposals over the years, but everything has been ignored by the policy makers,” said the angry association member.

E-commerce is fast gaining traction in India with the market expected to grow at a compound annual growth rate (CAGR) of 27 percent between 2019 and 2024 to reach $99 billion, according to Goldman Sachs.

However, many retailers, especially the offline ones, are still feeling left out of the game despite joining the online bandwagon.

“If the country’s leading e-commerce players are giving preferential treatment to a select group of sellers, we will continue to remain in a disadvantageous position despite joining their online platform,” said a CAIT member.

“Even if we launch our own online platform, which we are in the process of starting, we may not be able to compete with these e-commerce giants. That’s why we want a level-playing field and transparency in the sector,” he argued.

He noted that many pandemic-hit small retailers offering online and offline services are still struggling to survive in the absence of tangible support from the government.

Industry observers concurred that while some retailers are able to cash in on the e-commerce boom, many MSMEs (Micro, Small & Medium Enterprises) have not been able to ride the wave successfully.

According to Rajveer ‎‎Singh, managing director of Apex Cluster Development Services Pvt. Ltd (ACDS), which offers services to empower MSMEs, e-commerce companies have yet to support their growth.

In December last year, Amazon India and the Confederation of Indian Industry (CII) joined hands to train MSMEs on scaling up their business in India and globally by digitalization and e-commerce adoption.

Amazon India also has been investing in new projects and ramping up local operations to strengthen its position in the country.

Last week, the company announced a plan to start manufacturing electronic products like FireTV stick in India later this year.

On Tuesday (Feb. 23), it said it has partnered with local electric vehicle (EV) maker Mahindra Electric as it looks to deploy 10,000 EVs in India by 2025. The vehicles will be designed and manufactured by local original equipment makers such as Mahindra Electric.

Amazon reportedly invested about $1.5 billion during the fiscal year ended March 2020 across its marketplace, payment and wholesale business units in India to capitalize on the country's fast-growing e-commerce sector.

India’s e-commerce ecosystem is led by Flipkart, Amazon and Paytm Mall. Other players include BigBasket, the country’s largest online supermarket, and Reliance Industries’ online grocery store JioMart, which aims to rope in small traders all over India according to its ambitious strategy.