In the latest news, Walmart chief executive Doug McMillon had written to Prime Minister Narendra Modi as he sought for certainty and predictability in India’s business environment. McMillion had met Modi on September 25 during the Prime Minister’s visit to the US.
According to sources, the changes in rules of foreign direct investments for ecommerce marketplaces had not convinced Walmart-owned Flipkart and its rival Amazon. This had further also overhauled the business models of the company.
Walmart was especially upset since the changes took place only months after the company had paid $16 billion to purchase Flipkart. According to sources, the local units of both American companies were now undergoing probes owning to their alleged roles in the predatory pricing which were forcing small retailers out of business.
In his letter, McMillon drew attention to Walmart’s commitment to India, in addition to the country’s investment supporting small and medium scale businesses. The letter also touched upon issues of global sourcing from the country and job creation which US intended to do in the future with India. In addition, McMillon focused on calling for a stable environment. Furthermore, he praised PM Modi for uplifting India’s ranking on ease of doing business.
Spokesperson of Walmart India however declined to comment on the letter. The letter has surfaced around a time when small traders are going against foreign-owned marketplaces, in addition to blaming predatory pricing of two companies resulting into downfall of businesses of traditional retail during the current peak season of Diwali. In addition, the small traders are accusing Amazon and Flipkart for conducting “unfair business practices” and for violating FDI rules.
The Confederation of All India Traders on Monday determined that Flipkart and Amazon were generating business of worth Rs 19,000 crore as a result of their events of four-day mega sales taking place earlier this month. In addition, commerce minister Piyush Goyal also commented the government was probing Amazon and Flipkart for predatory pricing. Experts allege this development has further caused a setback to the two companies who were already facing problems due to the regulations.
A 25% cap was imposed by the Indian government on amount of goods supplied by an affiliate of a foreign owned marketplace to an independent seller. This change came into effect after Walmart bought Flipkart. Before introducing this regulation, preferred sellers were liable to a major share of merchandises available for purchase on Amazon as well as on Flipkart.
In March, Walmart had alleged, an investor in India should expect changes although it was disappointing the changes happened so quickly after purchasing Flipkart.
“We will have legislation changes; we know that and you work your way through it. It is disappointing that you have a law like that changed that quickly, but we have made the adjustments and we are moving forward,” chief financial officer Brett Biggs told analysts at an investor’s conference.
“The change in Indian ecommerce regulations came in as a shock to Walmart,” said a top company executive.
Last year, Walmart had announced that India’s new investment rules for ecommerce were regressive and also had the potential to upset trade ties.
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