In May 2018, Walmart made the most expensive acquisition in its history, spending $16 billion to acquire Indian e-commerce leader Flipkart. By then, its arch-rival, Amazon, had itself already invested over $4 billion into its Indian operations.
Some called it the end of the bruising discounts and investments-driven war that had left both sides billions of dollars poorer with no profits in sight. Others saw the setting of the stage for a new battle royale between the offline (Walmart) and online (Amazon) heavyweights in the largest available retail market in the world after China had called time on both of their aspirations earlier in the decade.
By October, both fired off their annual flagship sale events to coincide with the festival of Diwali—Flipkart’s Big Billion Days versus Amazon’s Great Indian Festival. Ignoring the wildly exaggerated accounts, both platforms did fairly well. They then declared themselves victorious and retired temporarily to rejig their organisations and close their operating plans for 2019.
But in the last few days of 2018, India’s Ministry of Commerce & Industry decided to drop an innocuous grenade which disrupted the two’s year-end parties and planning meetings. It was titled “Press Note No. 2 (2018 Series) – PN18-2.” Shorn of legalese, the government clarified that much of the way leading e-commerce platforms, including Flipkart and Amazon, were conducting business in India was illegal. They had time till 1 February 2019 to remedy things.
Market players and analysts had predicted this would happen because unlike previous years, while 2018 was a good Diwali season for e-commerce sales, it was a really bad one for offline retailers. Large and small retailers, who for years had put up with what they saw as predatory pricing by e-commerce marketplaces, now had to contend with being shut out of many products and brands. This happened as Flipkart and Amazon established strategic alliances through exclusive products and marketing support for all major brands in the country across every product category.
It bears reminding that India’s online retail market is still miniscule—less than 2% of the overall retail pie as of FY18. But e-commerce is an easily targetable villain compared to abstract macroeconomic concepts like GDP growth rates, disposable income, savings rate, etc.
And with an incumbent government—one that had traditionally drawn support from small traders and businesses—going into an election year on the economic back foot, it was not hard to see why it claimed to have “only reiterated the policy provisions (from ‘Press Note No. 3 (2016 Series)’ issued by DIPP – PN16-3) to ensure better implementation of the policy in letter and spirit”.