The world’s biggest tech companies are at serious risk of losing a $32 billion market

Amazon CEO Jeff Bezos.

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Amazon CEO Jeff Bezos.
source
Reuters

  • Life may get harder for big American tech firms trying to break into one of the world’s biggest online shopping and mobile markets.
  • India is proposing new laws that would protect homegrown companies trying to compete with the likes of Amazon, Facebook, Google, and Apple in online shopping.
  • India wants to level the playing field for domestic startups, store Indian user data in India, and change the rules around how foreign companies sell online in India.
  • It could cost US firms dearly because India is predicted to become a $32 billion ecommerce market by the end of this year.

Apple, Amazon, Google, Facebook and other US tech titans are facing major hurdles on selling online in India, thanks to a new ecommerce bill which prioritises homegrown firms.

According to The Wall Street Journal, which has seen a draft of the bill, the new rules would create a hostile environment for foreign tech giants, despite India being relatively open to outside competition. The Economic Times also reported on the proposals at the end of July.

Here are the most drastic changes being proposed in the draft bill:

  • The creation of a “level playing field” which would prioritise Indian startups.
  • Indian users’ data would need to be stored exclusively in India, potentially denting the tech giants’ online ad businesses.
  • Clamping down on loopholes that allow the likes of Amazon to skirt government rules around foreign ownership of retail.
  • Marketplace companies are currently restricted from holding inventory, but those restrictions would no longer apply to Indian-controlled companies selling Indian products.

It isn’t clear when the draft policy might become law, and local media reports suggest it has been widely criticised and is still under review by government officials.

India’s ecommerce market will be worth $32 billion in 2018, according to statistics from eMarketer. This is still small compared to the US, where eMarketer estimates Amazon alone will clear $258.22 billion in revenue, but the important number to look at is growth. India’s ecommerce sales will rise 31% year on year this year, putting it behind only China and Indonesia. Adobe stats peg US ecommerce growth this year at around 18% year on year so far.

That makes India an extremely important focal point for US companies seeing their home markets slowly level off, and looking for future growth. Amazon CEO Jeff Bezos said in 2016 that the company would funnel $5 billion into its Indian ecommerce operation. The company doesn’t break out Indian revenue in its financials, but its overseas operating losses show that the company is willing to lose money in order to beat local players.

Flipkart's Chief Executive Officer (CEO) Kalyan Krishnamurthy.

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Flipkart’s Chief Executive Officer (CEO) Kalyan Krishnamurthy.
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Reuters/Saumya Khandelwal

It’s that attitude which appears to have the Indian government alarmed.

China, another potential source of major growth, has created safeguards for its homegrown firms. As a result, the likes of Tencent, Alibaba, and Meituan dominate their home market and are worth billions – while foreign US firms struggle to achieve the same market share.

In India, major ecommerce firm Flipkart was acquired by Walmart for $16 billion.

And Vijay Shekhar Sharma, India’s youngest billionaire and founder of ecommerce payments firm Paytm, hit out at foreign rivals in February. He wrote that India “must not let them colonise our Internet.”