Site icon TechNewsBoy.com

Can it get any worse for Amazon in India? | ZDNet


Image: hadrian – ifeelstock / Getty Images

When one of the world’s richest people puts on Indian wedding garb and dangles himself from the door of a brightly coloured truck in New Delhi to flog his brand, you know he’s not doing it purely for public theatre.

From the outset, Jeff Bezos has been focused on capturing India even if it’s meant monkeying around and dressing up in posh wedding gear. After all, the country is an El Dorado for consumption, and the more the world consumes, the more Amazon has thrived.  

The Indian truck photo shenanigans, in fact, were staged to announce Amazon’s first big ticket back in 2018 — a $5.5 billion spending splurge in India, followed by a further $1 billion last year, all of which were aimed at cementing the image that Amazon was here to stay.  

Since Amazon set foot in India in 2013, it has competed neck-and-neck with Flipkart as one of the two reigning ecommerce giants. It also seemingly dealt with the compliance issues that arose when new ecommerce rules were announced in December 2018. All the while, it continued to make boatloads of cash in the country as a pandemic raged on.

But those days now seem humdrum when compared to the mess the company currently finds itself in.

Amazon is currently embroiled in a bitter court battle with new archnemesis Reliance, whose chief, Mukesh Ambani, is perhaps one of the only businesspeople in the world with the requisite cunning, ability, ruthlessness, and chutzpah to take on Bezos.

The fight is over Future Retail, a sprawl of 1,800 stores under five different businesses, including leading supermarket chain Big Bazaar, which was put on sale to pay off debt. Future Retail’s owners simply couldn’t endure the ₹7,000 crore cratering of business during the pandemic despite it being a jewel for whoever decides to buy it, considering the retail expanse along with brands, warehousing, and logistics that are already in place at the company.

Enter Mukesh Ambani, who agreed to pay $3.4 billion for the chain. With Future Retail, Ambani wants to establish retail supremacy within the overarching goal of complete digital domination.

Must read: Guess who looks more like a global, octopus-like Amazon in India? (Hint: It isn’t Amazon)

Pertinent to this fight is Reliance Retail’s operations, which is already the largest in India, with 12,200 stores across groceries, fashion, and electronics amongst other things in a market worth almost $900 billion today, with some $600 billion encompassing groceries alone.

It is this market’s humongous potential that has both Bezos and Ambani jockeying for position: Only 10-15% of Indian retail is organised. Much of the rest comprises some 15 million small neighbourhood grocers, called kiranas, where India really does its shopping.

This is where Ambani firmly has his eye. In a masterstroke, he first began the task of wiring these kiranas together last year, right after the launch of his newly minted grocery arm, JioMart.

He then lured Facebook to invest close to $6 billion in exchange for JioMart gaining the ability to piggyback onto WhatsApp, India’s most popular messenger service owned by Facebook, with its over 400 million registered users. Add that to the 410 million Reliance Jio customers and Ambani suddenly has a digital sphere of influence that’s tough to beat.

With the largest telco in India, Reliance Jio, as his hub, Ambani envisions controlling everything that lies in between the farm or the factory, and your house or dining table.

The company wants to source its products from contracted farms, turn them into food products or ship them whole to your local grocery store, before providing access to these products to customers via either JioMart or WhatsApp.

But can he wrest Future away from Bezos?

THE BATTLE FOR FUTURE

It will only add to Bezos’s mythology to say that he predicted a time when a company like Future Retail would be primed to tumble into his lap.

Whether he, or one of his deputies, did or did not is unclear, but Amazon did engineer a very savvy move by picking up a 49% stake in Future Coupons, the parent firm of Future Retail for ₹1,400 crore in 2019.

Amazon says that part of the deal included a non-compete clause that disallowed Future from flogging its retail division to a competitor like Reliance. It also included Amazon’s right of first refusal of the purchase of Future, which if binding, would give Amazon the right to have the first opportunity to buy the company.

The two also agreed that Future Retail products would also be a part of Amazon’s new retail gameplan, which intended to deliver them to households in select cities within two hours of a customer order.

When Future was close to going belly-up, however, Reliance Retail scrambled to make an offer of ₹24,000 crore ($3.4 billion) and the two Indian businesses have since been lobbying the government and the press to let the deal go through.

Employees of Future have also been strident supporters of the Reliance deal, labelling it as their best chance of snagging the desperately needed unpaid dues. Supporting them is the association of traders, perennial enemies of ecommerce companies like Flipkart and Amazon, who say they have been driven out of business by unfair predatory pricing tactics.

Amazon, though, is hanging in there, hoping that the courts will resolve this increasingly acrimonious contest. The case was initially sent to the Singapore International Arbitration Centre (SIAC), which issued an interim order in favour of Amazon.

On March 18, a single high court judge in India also supported the interim order in favour of Amazon, but in what has proven to be a legal puzzler, two judges of the same court reversed that decision a few days later. Now, the case has gone to the Supreme Court and a final judgement will be issued at the end of April.

Meanwhile, if all of this isn’t horrible already, Reuters came out with a damaging story last month alleging that Amazon violated the terms of new ecommerce rules issued at the end of 2018 — a complaint that has surfaced every now and then ever since it entered into the Indian market.

You may recall that ecommerce companies like Flipkart and later Amazon existed for years in a policy loophole, where offline multi-brand retail companies were restricted to foreign ownership of less than 50%, and no such rules applied to foreign-owned ecommerce companies.

But in 2018, the government, in no uncertain terms, banned Flipkart and Amazon from sourcing more than 25% of their inventory from a single vendor. By closing that loophole, it pulled the rug from under companies like Amazon and Flipkart.

At any rate, companies like Amazon requested for compliance to these rules to be delayed since they have had to ostensibly re-engineer their businesses. At the time, everyone thought Amazon’s decision to slowly shift its business around would bring an end to these ecommerce tensions.

However, the Reuters report — basically old wine in a new bottle — has now suddenly, in the midst of the Future battle, inspired investigations from both the government’s foreign exchange regulator and industry watchdog, the Competition Commission of India (CCI), which had previously cleared allegations made against Amazon.

To be clear, Bezos needs the legal win against Reliance badly. It may prove too bizarre to believe, but Amazon, after some 15 years in China, was beaten at its own game. It was forced to draw its shutters in China because it couldn’t compete with local Chinese ecommerce outfits that were willing to operate on razor-thin margins.

Honing in to the present day, it won’t be any easier in India, with Narendra Modi and Mukesh Ambani being chums. In addition, the federation of traders, which is gunning for Amazon, and alleges the company uses predatory pricing tactics.

In the meantime, Amazon has urged the government to not change any of the newly enacted rules until investigations into the firm are over, lest it also dent global investor confidence in India. This is unlikely to deter the Indian government, however, with the exception of a quid pro quo in the form of sanctions against, say Indian IT exports, or similar businesses that ply a substantial amount of their trade in the US.

If the court decision in late April doesn’t go Amazon’s way, the company’s fortunes in the country could go the China way. If it does, it will certainly make Jeff Bezos furious that he met his match in the form of an Indian businessman who shares the same ferocious desire for winning.

Related Coverage

For all the latest Technology News Click Here 

 For the latest news and updates, follow us on Google News

Read original article here

Denial of responsibility! TechNewsBoy.com is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – abuse@technewsboy.com. The content will be deleted within 24 hours.
Exit mobile version