- Amazon and Walmart lost over $50 billion in market value on Friday
- The new rules in India may hurt Amazon and Walmart's international revenue even more
- Amazon's international sales growth halved in the quarter-ended December
India's new rules for online retail kicked in on Friday and that led to a massive sell-off in two blue-chip stocks halfway around the world, in US.
Nasdaq-listed Amazon’s shares fell by 5.38% and Walmart’s stock lost 2.06% on the New York Stock Exchange (NYSE). Together, the damage was worth over $50 billion in the market value two stocks.
The fact that Amazon's growth is broadly slowing - though still growing - speaks to how incremental e-commerce growth is becoming "somewhat more difficult and expensive," Morgan Stanley analysts said. In other words, the margin of profit on every penny of additional revenue may be smaller than it is now.
One of the fears on Wall Street is that both companies Amazon and Walmart, which bought the Indian e-tail major Flipkart in 2018, will lose business in one of the world's largest consumer markets, India.
The Narendra Modi government changed the rules in December 2018 for foreign players in India's online marketplace, curbing them from offering consumers ‘deep discounts’ or sell their own brands through their respective platforms.
The fall in Amazon's share price was worse than that of Walmart because the latest earnings report showed that world's largest e-tailer is already witnessing a sharp slowdown in its international sales. In the three months ending December 2018, the growth in Amazon's revenue from markets outside the US nearly halved to 15% compared to the same time last year.
The new rules in India could further eat into Amazon's profit. India changed its policy after complaints from India's small traders who fear that the American giants could squeeze out the small corner shops and dominate Indian retail. India's home-grown retailers accused Amazon and Walmart of unfair bias towards affiliate vendors and predatory pricing.
However, as Business Insider explained recently, the biggest beneficiary of the new policy may not be a broke Snapdeal or the now-jaded Shopclues. It is likely to be India’s largest retail chain operator Reliance Retail, owned by Mukesh Ambani — the richest man, not only in India, but in Asia.
It is to be seen how Donald Tump's White House reacts to the change in policy in India that hurts two America's marquee companies.
In a world where are shopping less almost everyday, a market like India with a population of over a billion is an attractive spot.
The India Brand Equity Foundation (IB estimates that online retail alone will be a $73 billion market in less than three years, more than double the estimated size in 2018.
However, allowing foreign retailers an unchecked ride has been a political hot potato in India because still 90% of India's retail market is small, unorganised traders. Still, online retail has grown into a massive opportunity with improving internet access in the world's fastest growing economy, India. As of now, only 3% of the county's retail market is online.
Amazon has invested over $4.7 billion in India over the last six years, primarily because it identified the potential of the Indian market. For the same reason, Walmart bought Flipkart in 2018 for a whopping sum of $15 billion, paying a heavy premium for joining the game late. Now, Asia's richest man Mukesh Ambani is also joining the race and he has a level playing field, thanks to the new government rules, to compete with the two American behemoths with equally deep pocket, if not more.
Will this lead to a diplomatic standoff between the Indian and the American government? Tussle over trade barriers are anyway the flavour of the season.
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