Even though Andy Jassy, CEO of Amazon, has announced plans to invest an additional USD 15 billion in India by 2030, bringing the tech giant's total investment in the country to USD 26 billion, India's trade minister claims the money is only to cover the company's losses and is not cause for celebration.
"When Amazon says it will invest a billion dollars in India, and we all celebrate, we forget that these billion dollars will not be used to provide any significant service or investment to boost the Indian economy. On August 21, Union Minister of Commerce and Industry Piyush Goyal stated that they created a billion-dollar loss on their balance sheet that year and had to make up for it.
Goyal was speaking at an event in Delhi to announce a report titled 'Net Impact of E-Commerce on Employment and Consumer Welfare in India'. He also stated that Amazon has suffered significant losses as a result of its exploitative pricing policies.
"If you make a loss of Rs 6,000 crore in one year, doesn't it smell like predatory pricing to any of you? What caused that loss? After all, they are an e-commerce platform, and they are not legally permitted to conduct B2C transactions. The e-commerce platform cannot legally conduct business with consumers (B2C)," Goyal stated.
Amazon Seller Services, which handles the Amazon India marketplace, saw its income flatline at Rs 22,198 crore in FY23, representing a meager 3.4 percent year-on-year growth. This lackluster growth came as the company's loss increased by 33% year on year to Rs 4,854 crore in FY23.
Global e-commerce enterprises can operate as independent marketplaces in India. However, foreign direct investment (FDI) laws prevent multinational retailers from functioning independently in offline retail. FDI in multi-brand retail is limited to 51%, with local partnerships. Even so, official approval is necessary.
"When they are caught, they begin shutting down those entities. However, they only redirect all business through an entity to demonstrate that it is (a) business to business (B2B) (transaction), despite the fact that you all buy on these platforms, don't you? How do you buy? B2C is not permitted on certain platforms. How do they do it? Shouldn't this worry all of us?" Goyal questioned.
Over the last two years, Amazon has closed Cloudtail, one of its largest sellers. Cloudtail was a joint venture between Amazon and N.R. Narayana Murthy, the founder of Infosys. A few months after Cloudtail closed, Amazon chose to close Appario Retail, another big seller on the marketplace. Frontizo Business Services housed Appario Retail, which was a joint venture between Amazon and the Patni company.
Goyal also questioned Amazon's rising losses. "...and how did that loss occur? They paid Rs 1,000 crore to professionals, whose identities I am unaware of. I am a chartered accountant (CA) and have previously studied law. I'd like to know which CAs, professionals, and lawyers receive Rs 1,000 crore. Unless you pay all of the greatest lawyers to stop them so that no one can bring a lawsuit against you," he explained.
"You can take retainership with all the top lawyers and then there's nobody to fight against them," Goyal explained. To be sure, the Minister was quick to add that he is "not wishing away the e-commerce industry; it is here to stay," but the role of this industry must be structured in an orderly manner.
Goyal stated that the e-commerce sector has a 'function to play' in the country. However, the country has to reconsider that position. Goyal signified, "We must carefully consider what that job is and how it might be organized more effectively. Is predatory pricing a beneficial policy for the country?"
"Are we going to cause major social disruption as e-commerce grows? I do not see it as a source of pride that half of our market may become part of an e-commerce network in ten years; rather, it is a source of anxiety," the minister stated.
The minister also stated that smaller participants in the ecosystem are being threatened. "How many mobile stores do you notice presently around the corner? And how many were there ten years ago? Where are the mobile stores? Will only Apple or huge retailers offer mobile phones and accessories?" Goyal questioned.
“We must ensure that this ease and connectivity are citizen-centric and help the wider portion of society,” Goyal stated. Some industry professionals disagreed with the viewpoint. Theoretically, all organized retail, including ecommerce and modern retail, will have an impact on small businesses. However, it is important to note that the entire retail pie is rising. Ecommerce growth appears to be enormous since the starting point is so low. Modern trade is also expanding at a healthy rate.
