How Amazon and Walmart’s Flipkart Continue to Skirt India’s E-Commerce Laws

Small businesses are left with no reprieve in sight unless JioMart changes things

In 1968, my grandfather set up a small hardware and electronics store, laying the foundation for a family business that grew and flourished over the next 50 years. But things have changed in the last couple of years. From thriving in competition, we’ve gone to just about surviving.

The problems faced by my family business are not much different from what small businesses and mom-and-pop stores around the world face: predatory pricing by deep-pocketed, e-commerce companies. Predatory pricing is a strategy in which dominant firms deliberately reduce prices to loss-making levels in the short term to force other players out of the market. It is considered anti-competitive because in the long run customers will have no option but to buy from the dominant players.

What enables companies to set predatory prices?

Amazon and Walmart-owned Flipkart have come a long way in India, capturing nearly 60 percent of the e-commerce market and slowly creeping in on the entire retail market.

In most countries where Amazon operates it not only facilitates a platform for third-party sellers to sell to consumers (marketplace-based model) but also maintains its own inventory and sells directly to consumers as well (inventory-based model). The biggest advantage of the inventory-based model is that e-commerce giants can leverage their bulk buying capacity to get steep discounts from manufacturers and this, in turn, makes it easier for them to sell at low prices.

In addition to bulk buying discounts, both Amazon and Flipkart can offer huge discounts, even if it means they incur losses, because of heavy foreign investments. Both companies currently do not make profits on their India operations. While Amazon relies on its profitable US arm, Flipkart relies on its US-based parent company, Walmart.

Small businesses in India, who currently constitute more than 75 percent of the Indian retail market, neither have the clout to purchase in bulk nor the ability to attract foreign investment. Owing to this…