Flipkart may be flipped: Indian policy-makers and regulators must wake up to Amazon's dominance tricks

Last week, I received a wonderful item from Amazon: a kilo of gajar ka murabba (sweet carrot preserve), as ethnic Indian a delicacy as it gets. It was neatly packed in bubble wrap sheets, delivered home for free and above all, at a price lower than available at local shops. As a customer, there were reasons to rejoice, but the incredible value-for-money deal did beg the question: What's the catch?

The answer came from distant Wall Street, whose tremors are being felt in the local e-commerce industry in a now-on, now-off marriage proposal between local rivals Flipkart and Snapdeal, who I have likened in the past to the two chess players in Satyajit Ray's Shatranj Ke Khilari losing out to the British empire in a story written by Munshi Premchand.

The harsh truth this week is that even if Flipkart and Snapdeal do indeed get together, they could do with some state support because it is becoming increasingly clear from emerging data that inspired regulation of e-commerce is a necessity in the new economy driven by digital technologies and global capital.

Reuters

Reuters

It is interesting to see Flipkart's co-founder, executive-chairman and former CEO Sachin Bansal launching a nationalistic private label brand "Billion" under Flipkart's umbrella to woo fashionable young Indians. But that is a bottom-of-the-pyramid play. What happened to Bansal the geeky IIT-ian? The real dream of building a world-class technology-driven online marketplace in India seems like a distant dream all of a sudden. There is a world of difference between a "Made in India" tech giant and a "Make for Indians" brand for lower-end consumers.

That could be one reason why Flipkart needs the government support -- even though both Flipkart and Amazon have Indians running big chunks of their businesses, while Flipkart thrives so much on cash from foreign investors like Tiger Global that its Indianness can be questioned.

Jeff Bezos-led Amazon has admitted candidly that the company's profit plunged 77% in the latest quarter because of its spending to build a hold in India. The point to remember is that what is good for the Indian customer in the short run may not necessarily be great for India as a whole in the long run if the competition in the marketplace is not even enough to ensure benefits for customers and employees.

I argued some months ago that start-up nationalism in India does make sense but that was largely in the context of rising protectionism under President Donald Trump in Amazon's homeland. The game is now deeper. There are already fears in Australia that Bezos is playing for dominance.

We now have hard reasons for the Competition Commission of India, the commerce ministry, the finance ministry and the Prime Minister's Office to sit up and take notice to see if Amazon is using its deep pockets and more important, emerging technological chutzpah, to conquer the Indian market in a way they cannot easily grasp now.

Here are some factors and questions they need to consider.

1) Anti-dumping provisions to protect local businesses in world trade are historically invoked when a country sells products in another market at below its domestic costs to beggar its local competition. Does Amazon's spend-and-conquer strategy come into such a framework as merchandise trade gives way to more complex e-commerce?

2) India has been opposing reckless foreign direct investment (FDI) in multi-brand retail on grounds that it hurts local shopkeepers. Is Amazon hurting local sellers somewhere in a roundabout manner? Is it getting away with stuff that on-ground retailer Walmart could not?

3) In the emerging context of e-commerce, everything from data analytics and artificial intelligence will come into play as super-snoop software applications dive deep into the minds of customers to build market share and profits. How do regulators ensure free and fair competition in such a context? Can market dominance driven by a lethal combination of high technology and undercutting capital infusions hurt a level playing field?

4) It is true that on paper, Amazon has Indian competitors including ShopClues and Infibeam in addition to Flipkart and Snapdeal. However, in a data, patent and algorithm-driven scenario, the nature of competition will change dramatically. Is the Niti Aayog aware of the dynamics?

Such questions will become more important in the coming months and years, even as India debates issues linked to 'data colonisation, a memorable term used last week by former Infosys CEO and Aadhar unique ID's creator Nandan Nilekani.

In sum: A new-new economy needs a new-new approach to global trade wars and regulation. Is the Narendra Modi government aware and awake?

(The author is a senior journalist. He tweets as @madversity)


Published Date: Jul 31, 2017 12:31 pm | Updated Date: Jul 31, 2017 12:31 pm


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