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Unfavourable regulatory environment, the biggest roadblock for Amazon and Flipkart: Report

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E-commerce marketplaces Amazon and Flipkart continue to be plagued with regulatory issues, which is among its biggest challenges

Mumbai: Despite their popularity and growth India’s two leading marketplaces Amazon and Flipkart continue to be plagued by an unfavourable regulatory environment, which is chief among the challenges the entities face in the country, as per a report by InGovern Research Services.

Amazon and Flipkart account for more than 60% of the Indian e-commerce market. However, they are faced with numerous challenges in the country. The primary among them for Amazon, which sells 4000 products per minute in India is an unfavourable regulatory environment since it’s a 100% foreign-owned retailer. In addition, Amazon’s sellers are facing increasing regulatory scrutiny many of which are as yet contentious, pointed out the report.

Other challenges for Amazon India are increasing competition in fast-growing categories, a weaker value proposition in quick commerce, and limited traction in tier 2 and 3 cities. Furthermore, in 2022, one of its main vendors, Cloudtail, discontinued operations. This was a big blow to the marketplace as Cloudtail drove nearly 35%-45% of Amazon India’s sales until 2021.

Flipkart, which hosts 4.2 lakh sellers on its platform, too is facing problems of regulatory nature. The leading e-commerce platform is facing allegations of anti-competitive behaviour. The country’s antitrust watchdog is planning a probe into the matter.

The home-grown e-commerce marketplace is facing issues on the sellers’ front as well. One of the most common issues faced by the sellers is unknown and delayed deductions to their accounts. These deductions are often unexplained and difficult to retrace to the order against which it was charged as per sellers. 

Meesho is another platform that has gained popularity in recent years due to the deals and discounts it offers. Meesho works on a zero-commission model, making it attractive for suppliers in Tier-2 and Tier-3 towns to sell their products on the platform.

Low average order value (AOV) (Rs 400-500 compared to AOV of Rs. 2000-3000 of Flipkart and Amazon), distribution costs, inconsistent product quality, counterfeit goods, delayed deliveries and poor customer service are some of the challenges faced by the social commerce platform.

Other e-commerce websites such as Nykaa, JioMart, Myntra, Tata Neo and others also faced major challenges. Nykaa’s brick-and-mortar might be affecting margins as it is a capital-intensive business while Myntra is trying to reduce its losses due to frequent returns and exchange requests from customers due to wrong product sizes, fabric quality, or product colours. 

InGovern is an independent corporate governance research and advisory firm which assists investors that have financial or reputation exposure to companies. Founded in 2010, its clients include mutual funds, insurance companies, foreign institutional investors, pension funds, hedge funds, custodians, private wealth management firms, HNIs, companies and others. It also assists companies in enhancing their corporate governance practices.

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