The new law will prevent both Amazon and Walmart from selling their own private brand fashions and private label products. The impact of that law is far-reaching. It affects sales of electronics like Amazon’s Echo as well as fashion items from Walmart’s George label. In addition, the new law, which will go into effect on February 1, 2019, will not allow foreign companies to use their supply chain expertise to achieve reduced prices for the Indian on-line shopper. Thus, Walmart’s everyday low price policy may not apply in India. That hits right at the heart of the company’s strategy.
The Indian ruling is to protect the small shop-keepers in that country from having to compete with these large retailers. It is similar to the French law called “Loi Royer” which also protects the small shop keepers. In India, there were huge protests by Flipkart’s competitors while the acquisition was being negotiated.
Walmart acquired 77 percent of Flipkart in August 2018. At the time, Walmart’s experience in foreign markets has shown that the company has trouble managing in these new business settings. In Germany, Brazil, Japan, and South Korea, the company had to withdraw after poor results and high losses. In India, the company had only a tiny share of market (estimated at 7 percent), whereas Amazon held a 30 percent market share. I am sure that the Flipkart acquisition was effected because Amazon was also negotiating for this internet platform.
Walmart should have known that Prime Minister Narendra Modi’s administration was turning protectionist. In the coming election, he needs the support of Indian retailers and has also indicated that he will impose tough new rules on the technology industry as well. Walmart, who saw unique opportunities through this acquisition, misunderstood the current mood. It seems to me that they focused too much on beating out Amazon.― Forbes