Many foreign companies find it tough to succeed in India. One reason, according to Flipkart co-founder Binny Bansal, is their inability to deal with India’s unique environment, as well as the frequent policy changes by the government.
Bansal, one of the co-founders of the Indian ecommerce giant, told CNBC that India is “definitely a very different market than Western markets.”
Speaking to CNBC’s Christine Tan at the Credit Suisse Global Supertrends Conference in Singapore in April, he said: “For Flipkart, we had to start our logistics arm on our own, which is something you don’t see happening globally. So you have to do things in a different way because of how the market is structured.”
That ability to learn to “do things on your own” and scale up “becomes an advantage for Indian startups, (which) can compete better,” said Bansal. That’s not the “strength of a lot of foreign companies,” he added.
Flipkart’s logistics arm, called eKart, was founded in 2010. Its Western competitor, Amazon, started calling itself a transportation service provider for the first time in 2016. It was only in recent years that Amazon significantly expanded its logistics footprint, leasing dozens of aircraft and thousands of trucks to handle some of its massive shipments.
New ecommerce rules
Recent developments have made it difficult for foreign companies to compete in Asia’s third-largest economy.
Last December, the Indian government effectively banned Amazon and Flipkart, which is owned by Walmart, from selling products of companies in which they have an equity stake.
The government announced that e-commerce firms could no longer form exclusive selling arrangements with sellers or offer steep discounts to consumers based on those deals.
Foreign direct investments would only be allowed into e-commerce companies that provide marketplaces for buyers and sellers, according to the new rules.
The new rules took effect in February, and followed complaints from local Indian retailers and traders about anti-competitive practices from the likes of Amazon and Flipkart.
That same month, the Indian government again outlined more regulations for the sector, focusing on data measures and improved privacy safeguards. That followed a move by the central bank in 2018 that forced payments providers — such as Mastercard and Visa — to store Indian users’ data locally.
Those changes in policies have made the environment even tougher to navigate, said Bansal.
“Things take a lot of time and capital to really develop and mature, and if policies keep changing, then every second or third year, it becomes very hard for everyone. For large companies it becomes hard to navigate, for small companies it just becomes hard to start and survive,” he said, at the conference.
“When we started, there were very few policies. But in 2018, 19, if you want to start an e-commerce company, you have to really go through what can you do, what can you not do,” Bansal continued.
Read the full story on CNBC.com
First Published: May 7, 2019 5:30 PM IST
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