Walmart chief executive Doug McMillion, following last week’s probe orders from India’s commerce ministry into Flipkart and Amazon India, has written to Prime Minister Narendra Modi seeking clarity around the business environment in the country, local media Economic Timesreported.
Walmart is upset over the detailed questionnaire the ministry sent last week to its India business Flipkart that it bought in 2018 for USD 16 billion, despite making structural changes to abide by the new foreign direct investment rules (FDI) that bans deep discounting by multi-brand online retailers, among many other restrictions.
Citing sources, the report said, in his letter, McMillion talked about Walmart’s commitment to India, including investments that are helping small and medium enterprises in terms of job creation and global sourcing of products. However, he asked the prime minister for a stable environment for conducting business.
Following multiple complaints from India’s offline trader’s body CAIT (Confederation of All India Traders), that claims to represent 500,000 physical retailers, India’s Commerce Minister, Piyush Goyal said e-commerce companies have no right to offer discounts or adopt predatory prices. “Selling products cheaper and resulting the retail sector to incur losses is not allowed,” he told media during a press conference last week.
During the five-day-long festive period sale, a marquee event by the Indian unit of both US-based companies—Amazon and Walmart—the e-tailers claimed to close sales to the tune of USD 3 billion. These festive period sales by online retailers have been a bone of contention for offline retailers for many years together, as the foreign funding, and corporate liaison with electronics manufacturers allegedly give them undue advantage over small physical retailers.
Post the implementation of FDI rules in December last year, Flipkart and Amazon have changed the way they source their products, as according to the new rules, e-tailers can’t buy products from the wholesale entities in which they have more than 49% equity. Both Amazon and Flipkart sourced products from wholesalers that on behalf of them buy products in bulk from manufacturers. Over the months, online marketplaces have gradually changed the ownership ratio to accommodate new rules.
Moreover, online marketplaces have also changed their stance regarding deep discounting, saying the discount is directly given by the brand and not them, and that they are just the facilitators. CAIT has approached the government to find out the truth in this statement, apart from writing to the manufacturers themselves.
This has sort of yielded some result in favor of the physical retailers, as smartphone brands including Realme, Oppo, and Vivo said they might not sign exclusivity deals with online retailers beginning next year.
“Over 30,000 cellphone stores have shut in the past year and a few thousand jobs have been lost. We need brand support to revive offline business,” Arvinder Khurana, president of All India Mobile Retailers Association (AIMRA), told Economic Times.