INDIA'S ETAILERS BATTLE IT
OUT IN GAME OF THRONES
FIGHT CLUB Why Amazon, Flipkart, Snapdeal & ShopClues
fight and can't lobby effectively against united offline retailers
& troublesome govt rules
It should have been like K Street (a US TV series on powerful lobbyist
firms).But it's become Game of Thrones (another US TV series, on powerful
royals fighting each other, not realising there's a bigger danger).India's
ecommerce blue chips are disunited and fractious, even when confronted
with a constricting set of central government rules the April-announced
policy on etailers and marketplaces and various state-level taxation threats.
This is a more serious fight than Twitter put-downs, for example, those
exchanged by Flipkart's Sachin Bansal and Snapdeal's Kunal Bahl. Amazon,
Flipkart, Snapdeal, ShopClues and others face a determined and united
brickand-mortar retailers' group, Retailers Association of India (RAI), but the
stars of ecommerce can't lobby the government with one voice.And the
impact of this on the etailing business is at best uncertain.
ET spoke to a wide range of people from the ecommerce industry for
this story. Many of them spoke on the condition they not be identified.
Amazon and Flipkart did not respond to questions. Snapdeal
responded, saying the company is working with all stakeholders on all
important issues. “Brick-and-mortar retailers are a huge cartel...they
will not even sell a bottle of water below an agreed price...unlike us,“ a
senior executive at a top etailer told ET, explaining the basic difference
in online and offline retail trade. Radhika Aggarwal, cofounder of
ShopClues.com, which gets funding from Tiger Global and Nexus
Ventures among others, has a sharp take: “This is like the Game of
Thrones as every house is trying to consolidate according to its
strength...We are a fragmented lot.“
The fragmentation can be striking. Early April, Amazon got the lobby group
Internet and Mobile Association of India (IAMAI) to draft a letter asking the
government for six months' moratorium on the marketplace policy's
implementation. But Flipkart and Snapdeal refused to sign it. People familiar
with this matter told ET that the etailers promoted by Indians refused to sign
because they thought US-based Amazon would benefit most from a policy
postponement. IAMAI did not send a letter. That a lobby group could not
even send a united petition is remarkable, say those knowledgeable about
government-industry relations. A senior executive of a large etailer was
candid: “It is true we hate each other...it is beginning to hurt. There should
be a joint, concerted effort. Why are brick-andmortar players successful in
lobbying? Because they speak in one voice.“
Divisions among etailers are getting sharper. Amazon CEO Jeff Bezos, as ET
reported, had lobbied Prime Minister Narendra Modi when the latter visited the US
earlier this month. Bezos reportedly asked for a hybrid model for foreign promoter-
A hybrid model would allow online retailing where a platform sources, stocks and
sells merchandise itself while also allowing other retailers to sell through it.
Flipkart and Snapdeal are ferociously opposed to Bezos's idea, four senior
executives from these two companies told ET. Homegrown etailers say they reckon
Bezos will find it tough to get his way but if he does, Amazon can pose a huge
“Amazon wants FDI in hybrid model so that they can embark on a scorched earth
policy by discounting indiscriminately which no player will be able to counter
because no one has excess cash to burn any more,“ says a person familiar with
He also explained Flipkart's constraints: “Flipkart is pivoted to marketplace model
now even if purely by default. If they have to go back to the inventory model, it will
be a gutwrenching change which the company won't be able to bear. Amazon on
the other hand is a veteran of the inventory model globally and would welcome it.“
Homegrown ecommerce stars happily point out to Amazon's “struggle“ to comply
with the new rules of online marketplace any venture that has FDI cannot have any
one vendor selling more than 25% of total sales by value.
Senior executives of these etailers claim Amazon's joint venture entity, Cloudtail,
currently sells well above the 25% threshold.
Such sniping is common and the contrast with the offline retailers' lobby group,
RAI, cannot be starker two cases have been filed by brick-and-mortar retailers
since May last year accusing ecommerce companies of circumventing Indian laws
and it was those lawsuits that forced the government to write the new online
More's on the way. RAI members, ET has learnt, are investigating what they see as
noncompliance of etailers with new marketplace rules. RAI is updated by its
members about etailers' special deals, pricing behavior and discounts.
A RAI member recently sent a screenshot of the Indian cricket team's cap being
sold at a 60% discount on Amazon.in and of a Samsung Galaxy Note 4 smartphone
being sold on Flip . 29,900, at 18% discount to the original kart for ` price. Under
the new rules, ecommerce companies are not allowed to give any discounts.The
marketplaces say it is the sellers that are offering products at discounted prices. RAI
is compiling what's essentially a chargesheet against India's ecommerce stars. But
the stars themselves are not even getting together on existential issues.
Here's a glaring example. Many ecommerce executives and industry observers say
the new set of rules doesn't offer clarity on whether marketplaces can promote
themselves.United lobbying would have helped etailers get an answer and
probably a way to promote themselves. But disunited, no individual etailer is
willing to risk promotion, lest the united offline retailers' lobby group come after it.
RAI's CEO Kumar Rajagopalan is scathing on India's etailers. “Their issues are same as
retailers but they don't want to call themselves retailers that is why they are like
illegitimate children of the same industry. They are not willing to recognise their
parents...because if they tell who their parents are they will be jailed.“ Faced with such an
aggressive and purposeful rival, India's retail majors are finally thinking of some united
efforts, but these are plagued by the instinct to go alone.
So, as senior executives from ecommerce space said, while Flipkart, Snapdeal and Amazon
are thinking of joining hands under Nasscom and petitioning the government on allowing
marketplaces to promote themselves, they are fighting separate legal battles despite
having the same grievances.
In April, Flipkart challenged a Gujarat government entry tax on goods etailers deliver to the
state from outside. Amazon challenged the same tax in early June.
Brick-and-mortar retailers, despite being promoted by powerful corporate entities such as
Reliance Industries and Aditya Birla Group, would have most likely mounted a joint legal
challenge. India's online retail stars continue to play the costly and potentially bloody
Game of Thrones.
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