India’s revised e-commerce rules caused widespread disruption on Amazon’s India website when they kicked in on Friday, forcing the company to take down its key grocery service and remove a wide range of products such as sunglasses and floor cleaners.
Two sources with direct knowledge of the matter said the products began to disappear from the Amazon India site late on Thursday as it began complying with the revised norms before a midnight deadline.
The company has no choice, they are fulfilling a compliance requirement … customers will suffer, said one of the sources.
UPDATE: Amazon India made its Echo line of smart speakers and other products available for sale shortly after taking them down. Earlier the Indian wing of the Seattle-based e-commerce giant used to sell its products via Cloudtail. However, the company has now updated the seller to Hariom Communication LLC. “While we remain committed to complying with all laws and regulations, we will continue to look to engage with the government to seek clarifications that help us decide our future course of action as well as minimize the impact on our customers and Indian sellers,” Amazon India told India Today tech in a statement.
Numerous items sold by Amazon vendors such as Cloudtail, in which Amazon holds an indirect equity stake, were no longer available on its India site. Amazon Pantry, a grocery service primarily managed by company affiliates, was also discontinued, though grocery products could be purchased individually.
“Pantry is completely empty, how I am suppose to grocery shop,” Twitter user Pamela wrote on the social network. “Whatever government rules are, (I) don’t care, you guys fix it, I need to shop.”
Amazon, which saw record sales and profit during the holiday season, has forecast first-quarter sales below Wall Street estimates due to the uncertainty in India – one of its key growth markets.
The situation in India is “a bit fluid right now,” but the country remains a good long-term opportunity, Amazon Chief Financial Officer Brian Olsavsky said. The company’s main goal was to minimize the impact of the new rules on customers and sellers, he added.
Flipkart CEO Kalyan Krishnamurthy warned last month that it faced “significant customer disruption” if the new rules were implemented from Feb. 1. On Friday, the company said it was disappointed the government acted in “haste”, but assured compliance.
“We are committed to doing everything we can to be compliant with the new rules,” Flipkart India executive Rajneesh Kumar said in a statement, without explaining how the website was impacted.
The U.S. government has also urged India to protect the investments of the two American retailers, Reuters reported last week.
Both companies have bet heavily on India being a big growth driver: Amazon has committed to investing $5.5 billion there, while Walmart last year spent $16 billion on Flipkart.
But Prime Minister Narendra Modi’s administration is seen as keen to appease small traders in the run-up to a general election due by May.
Many small traders say the e-commerce giants use their buying power and control over inventory from affiliated vendors to create an unfair marketplace where they can offer deep discounts on some products. Such arrangements will be barred under the new policy.
Industry sources have said the new rules will force the big e-sellers to change their business structures, and will raise compliance costs.
Amazon India told Reuters it was committed to remaining compliant to all the laws of the land, adding that all sellers make their own independent decisions of what to list and when.
Exclusive deals with sellers will be discontinued, the two sources said.
It is unclear how long the disruption will last. Would-be buyers of Echo speakers on Amazon India saw a message reading: We don’t know when or if this item will be back in stock.
The impact of the changes on Flipkart was not clear. It did not immediately respond to a request for comment.
In a letter to India’s industries department in January, Chief Executive Kalyan Krishnamurthy said the rules required Flipkart to assess all elements of its business operations and risked causing significant customer disruption.