Amazon and Walmart face the anger of 70 million Indian merchants

NEW DELHI: At the heart of the largest wholesale bazaar in New Delhi, merchants who normally compete with each other have united against a common enemy.

Amazon, Flipkart !, One merchant after another shouts into a microphone from a small stage in the central traffic circle of Sadar Bazaar. About 50 other merchants gathered around shouting in unison: “Come back! Came back!

The sit-in, which created more chaos than usual among the rickshaws, motorcycles and oxcarts that ran the market path, was one of 700 protests against Inc and Walmart Inc, owner of the local e-commerce leader . Flipkart, which organizers said took place in bazaars across India on a recent Wednesday.

Merchants are mobilizing against the giants of global electronic commerce, claiming they are involved in predatory pricing in violation of the new rules aimed at protecting local businesses. The future of retail sales is at stake in a country with 1.3 billion consumers, where Walmart and Amazon have sunk billions of dollars trying to break the market and capture its growth potential.

Amazon and Flipkart are a second version of the East Indies company, said Praveen Khandelwal, national secretary of the Confederation of All Merchants of India at the Delhi protest, referring to the British commercial house whose arrival in India began almost 200 years of colonies. rule. The reason for Amazon and Flipkart is not to do business, but to monopolize and control.

The government announced in October an investigation into accusations of predatory prices. Amazon and Walmart told Bloomberg News last week that their operations comply with Indian laws and only act as a third-party market.

The conflict comes amid a broader global reaction against the dizzying expansion of technology companies, from taxi driver protests against an Uber clone in Jakarta, to emails for a Softbank-backed delivery company that creates a bonfire of its backpacks in Bogotá protesting low wages and low benefits.

Representing some 70 million small merchants who collectively control almost 90% of India's retail trade, the merchants' union has proven to be a strong political force. Merchants are an important part of the voter base of the Bharatiya Janata Party of Prime Minister Narendra Modi.

For a government, especially a BJP government, which has the support of small business owners, it may not be prudent or politically advisable to completely ignore such demands, said Sandeep Shastri, a political scientist at Jain University in Bangalore. They would have to see them taking some steps at least.

The power of the union is an important reason why the government has imposed such burdensome restrictions on foreign retailers, including a minimum investment of $ 100 million and strict local supply rules. Due to the obstacles, the likes of Walmart and Carrefour SA have renounced to open their homonymous stores in the country.

Merchants won a key victory against foreign e-commerce players last year when the government tightened regulations on how platforms can sell products. The rules, designed to create a level playing field in terms of prices, forced Amazon and Flipkart to remove thousands of items from their virtual shelves and restructure much of their local operations.

The changes, after Walmart announced its acquisition of Flipkart, led foreign companies to chaos and led analysts to question their investments in India. With the closure of Amazon from China and the performance of Walmart e-commerce in the US UU., Mixed, both companies have settled in India as a key to growth. Amazon CEO Jeff Bezos promised to spend $ 5.5 billion to win India, while Walmart's $ 16 billion Flipkart deal was the retailer's largest.

Merchants now claim that Amazon and Flipkart are circumventing the rules with predatory pricing and great discounts. They demand that the government close the online markets of the companies until they comply.

Amazon said its sellers have total discretion on what price to sell their products. Flipkart said it provides sellers with data to help determine which product deals will sell best at what price, but ultimately, business decisions are what sellers must make.

Amazon and Walmart find success in rural India during the sales season

The flash point for the last climb was Diwali, a festival that is the occasion for a gift bonanza similar to Christmas in Western countries. This year's festival in October came in the midst of a slowdown in consumer spending that has affected everyone, from car manufacturers to shampoo vendors. But while the merchants' union said its members saw a 60% drop in Diwali sales, Amazon and Flipkart managed to report record revenues from the six-day festival.

The merchants' union argued that online vacation deals must be in violation of the new rules, which led trade minister Piyush Goyal to announce an investigation.

E-commerce companies have no right to offer discounts or adopt predatory prices, Goyal said in October. It is not allowed to sell cheaper products and make the retail sector incur losses. Another government official said policymakers are looking to establish a dedicated e-commerce regulator.

A spokesman for the Ministry of Commerce and Industry did not respond to an email seeking comment.

Vinod Kumar, a 35-year-old merchant who sells cosmetics for women in the Delhi bazaar, seeks relief. Standing by his small stand, take a bottle of a rose water-based hair product. He sells it for 40 rupees (56 cents), but says customers can get it from Amazon or Flipkart for 30 rupees, with delivery directly to their home.

If everything is available online, why would anyone come to face the heat and crowds? He says. My business is shrinking day by day.

Kumar says that if the situation continues, it may break, as many other stores have already done.

General data shows that sales in traditional stores continue to grow in India. While these stores have seen a decline in their share of total retail sales since 2014 as electronic commerce and organized retail chains gain market share, the consumer market is expanding at a rate such as absolute spending with family stores it increased almost 60%, according to the consultant Technopak Advisors. That absolute growth rate is expected to decrease slightly to 50% over the next five years.

That can be a cold comfort to Muhammad Yusuf. The 72-year-old man, who runs a jewelry store in Delhi's bazaar, says he can't match prices online, has reduced his staff from six employees to two and is in danger of not being able to pay the rent.

However, Yusuf stands out in the e-commerce protest, as he wears a wool jacket with the Amazon logo. When asked why he is wearing it, he shrugs and says he needed something to keep it warm and found him at a nearby clothing stand. He bought it because it was cheap.