Amazon Has An India Problem
India, with its 1.3 billion citizens, is the second-most populous country in the world. The importance of India, which accounts for 17.5% of the world's population, cannot be understated for any large, multinational corporation.
Amazon—the world's largest online marketplace, AI assistant provider and cloud computing platform, undoubtedly needs to have a strong presence in India.
According to Amazon's most recent 10-K, which is an annual report required by the United States Securities and Exchange Commission, the company generated nearly 69% of its total sales in the United States. If you add the next three largest regions—Germany, the United Kingdom and Japan, the percentage of Amazon's total sales swells to nearly 90%. With only 10% of Amazon's $232 billion in sales coming from the rest of the world, it's not surprising Amazon founder Jeff Bezos is in India this week to try to make inroads in the country.
Bezos is in India for Amazon's Smbhav, which is an annual event the company holds to help it connect with millions of small and mid-sized businesses in the country.
Unfortunately for Bezos, he doesn't appear to be too welcome in India. From when he first touched down in the country earlier this week, thousands of protesters across 300 cities took to the streets to show their displeasure with the Amazon's business practices.
The Confederation of All India Traders (CAIT), which is a group that represents 70 million traders and 40,000 trade associations, planned the protests after saying Amazon is hurting local businesses by discounting products to attract shoppers online and away from their stores.
"Amazon is trying to create false propaganda that it is the true friend of traders, though it is the worst enemy," CAIT said in a statement. Sumit Agarwal, the National Secretary of the CAIT, called Bezos an "economic terrorist" and said Amazon will "destroy small retailers."
Earlier this week, the Competition Commission of India (CCI) ordered a probe into Amazon and Walmart's Flipkart, alleging they promote certain "preferred sellers," therefore hurting smaller sellers.
The CCI order pointed out four alleged anti-competitive practices—the companies' launching of mobile phones, promoting preferred sellers, discounting practices and prioritizing certain seller listings.
"Exclusive launch (of mobile phones) coupled with preferential treatment to a few sellers and the discounting practices create an ecosystem that may lead to an appreciable adverse effect on competition," the order read.
Bezos, who had even hoped to meet with Indian Prime Minister Narendra Modi, was declined the opportunity. According to Indian sources, the invitation was "communicated to Amazon last month itself," but there's speculation Modi doesn't want to meet with Bezos due to the Bezos-owned Washington Post's coverage of India. The article—'India's new law may leave millions of Muslims without citizenship,' is believed to have upset the Indian government.
So what do you do when people are upset and you have billions of dollars? You try to pay them to be happy. Bezos announced Amazon would make a $1 billion investment to digitize small and medium-sized businesses in India and hopes to export $10 billion worth of goods made in India by 2025. "I predict that the 21st century is going to be the Indian century," Bezos said.
However, this move wasn't well-received by everyone either. "They may have put in a billion dollars but then if they make a loss of a billion dollars every year then they jolly well have to finance that billion dollars," Commerce Minister Piyush Goyal said. "So it’s not as if they are doing a great favour to India when they invest a billion dollars."
Amazon has big aspirations in India but also appears to have big problems, from both politicians and ordinary citizens who are seeing their livelihood affected by the company. As India becomes increasingly vital to the world's economy, Amazon may have a difficult time determining how to best approach its business in India.
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