India has a plan to stop Amazon from growing unchecked.
Unlike the US where 88% of adults shop online, only 6% of India’s population has made the move. This week Amazon’s Prime Day took place in 20 countries, and we explained how the event was part of Amazon’s plan for world domination. They’re reaching the saturation point in the US for household’s that have memberships and are now looking at other markets to expand to.
India did not take part in Prime Day this week, as it’s been delayed because of the countries current situation with the corona virus pandemic. On June 22nd, the India’s Consumer Protection Rules, 2020 made an amendment to prevent it from ever happening “No e-commerce entity shall organise a flash sale of goods or services offered on its platform,”. They define a flash sale as one that offers “significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw large number of consumers.”
We should all know by now that these marketing events scam consumers into spending big for small savings. But the government’s main concern is that platforms manipulate these sales for big sellers. And the government wants to protect brick-and-mortar retailers.
Amazon got around India’s 2019 rules
The foreign direct investment (FDI) rules in February 2019 restricted e-commerce companies from entering into exclusive deals to sell at deep discounts, and barred them from procuring over 25% of the inventory from a single vendor, especially from sellers in which the companies own a stake in.
Amazon got around this rule, products from Cloudtail, a joint venture between Amazon and Catamaran Ventures that used to generate 40% of Amazon’s sales, were pulled after the ruling. But a week later, the seller was back after restructuring its ownership.
At least India’s Enforcement Directorate, which investigates financial crime, is scrutinising Amazon’s business in India and creating an environment where their actions are not going unchecked.
Starting early against Amazon is key!
As ecommerce grows in the India the state needs to act now. The new rules are installing consumer protection like “fall-back liability” where a seller fails to deliver goods or services resulting in loss to the consumer. Another will prohibit the sites from running and promoting their in-house, private brands. The companies also have to hire a chief compliance officer, a contact person for 24/7 coordination with law enforcement agencies, and a resident grievance officer. They will have 72 hours to respond to legal requests.
As Amazon looks to expand it’s important they don’t do so unchecked!