Amazon’s India Troubles: In Giant E-Commerce Vs Small Kirana, Has the Government Picked a Side?

In June Amazon chief executive Andy Jassy met Prime Minister Narendra Modi in Washington and pledged to invest $26 billion in India by 2030. Jassy said the global giant will “support start-ups, create jobs, enable exports and empower individuals and small businesses [in India] to compete globally”. Now, two months later, Piyush Goyal, India’s Minister for Commerce and Industry, is angry at Amazon, and has no qualms expressing it.  

In an unexpected yet unflinching attack at the global giant, Piyush Goyal said on Wednesday, August 21,  that Amazon’s promise of investment in India is only to compensate for the losses the company has made because of “predatory pricing” and is not something to celebrate. 

“When Amazon says that we are going to invest a billion dollars in India, and we all celebrate, we forget the underlying story that the billion dollars are not coming in for great service or any great investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year, they had to fill in that loss,” Goyal said speaking at the launch of a report on ‘Net Impact of e-commerce on Employment and Consumer Welfare in India’. 

Goyal’s blast was uncharacteristic. After all, the Modi government has been proud of foreign investment pouring into India. The government has positioned itself as a backer of big business. But Goyal did not mince his words, going on to warn that India’s markets could shift online within the decade posing existential risks to local businesses. 

Is Amazon Being Punished?           

The minister’s comment has understandably triggered a wave of responses from industry stakeholders. A senior board member of an industry body tells Outlook Business on condition of anonymity that he felt Goyal’s comments were a “motivated outburst”. “E-commerce has become such an essential part of our lives that it can only grow further. You cannot curtail its growth and stop it at the stage where Amazon is now,” he says. 

He further says that at a time when the government is “desperate” for foreign direct investment (FDI), statements like these will only hurt the country’s potential growth. “If the commerce ministry has issues with predatory pricing hurting local businesses, they should ask the competition commission to look into the matter and come up with fair pricing measures.” He adds that Amazon has created “massive employment” in India by empowering local sellers and the company should not be “punished” to fulfil the government’s other plans. 

Standing Up for the Little Guy 

Akshay D’souza, an independent consultant in e-commerce and retail, however, finds in Goyal’s remarks the government’s effort “to bring the internet revolution to the small store owner and break the monopoly which is causing a price variance.” D’souza does not think Goyal’s comments will drive away FDI but will only ask players like Amazon what they are doing to help the last mile kirana store owner. 

According to Adith Podhar, general partner at micro-venture capital (VC) firm Gemba Capital, the government is trying to break the monopoly of big e-commerce and propose a counterbalance through the Open Network for Digital Commerce (ONDC) by promising a level playing field where small retailers are not sidelined. “The narrative is not just about technology and market shares. It is also a story of preserving our community markets ensuring they too thrive in the digital era,” says Podhar.  

Goyal, on his part, came out with a clarification on Thursday, August 22, saying that the government is not against e-commerce companies and only wants fair competition between online and offline businesses. “We are very clear that we want to invite FDI, we want to invite technology, we want to have the best of the world. We are not against online at all,” he said.  

Goyal’s comments come at a time when there is widespread anticipation around his ministry’s release of India’s e-commerce policy. Industry experts say the government would want to make ONDC the next big thing in e-commerce and the network has been able to onboard major players like Flipkart, Uber and Myntra within a short span of time. They say Amazon’s loss could be ONDC’s gain. 

A Difficult Time for Amazon in India     

The commerce minister’s remarks against Amazon have come at a time when the global giant has already been struggling to sustain its businesses in India. Over the past two years, Amazon has shut down Cloudtail—its joint venture with Infosys founder NR Narayana Murthy and Appario Retail—a joint venture with the Patni group. The company’s India manager, Manish Tiwary quit Amazon earlier this year.  

Amazon has been losing market share to Flipkart in key categories and regions and to Softbank-backed Meesho in smaller towns and cities. It is also facing the rising challenge of domestic quick-commerce players such as Zepto, Swiggy Instamart and Blinkit. Amazon Seller Services, the company’s marketplace arm, reported a 33 per cent rise in net losses in the 2023 fiscal.  

The company has also faced the heat of the ‘Make Amazon Pay’ protests from workers and labour rights activists who accuse the company of fostering inhumane working conditions and pursuing unrealistic targets. In this backdrop, Piyush Goyal’s comments will only add to the company’s challenges and the global giant must now placate the Union government if it seeks to expand. We already know that announcing billion-dollar investments is not going to cut the ice. Does Amazon have a Plan B?