Walmart Inc. and Amazon.com have invested billions to do business online in India, but the Indian government threw up a roadblock this week with new restrictions on what foreign companies can sell in that country.
Starting Feb. 1, retailers based outside India will no longer be able to sell their own products, or those of companies they own, on their Indian e-commerce sites. They also won't be allowed to enter exclusive contracts with third-party sellers. A division of India's Commerce and Industry Ministry announced the new stricter regulations late Wednesday.
The Bentonville retailer spent $16 billion this year to acquire a majority stake in the Flipkart Group, India's largest online marketplace, in its biggest deal ever. Amazon, which has been selling in India since 2013, said earlier this year that it will invest $5 billion to expand its presence there.
India has long barred foreign retailers that offer more than one brand to sell directly to consumers in that country. The rule applies to retailers with stores and to online sellers. Walmart's Indian unit operates 23 wholesale stores, which can sell only to businesses, and said last month that it will open 47 more by 2022.
Acquiring a majority stake in Flipkart allowed Walmart to reach an expanding middle class in an e-commerce market projected to grow from roughly $20 billion to about $200 billion by 2027, according to investment firm Morgan Stanley.
In response to a request for comment, a Flipkart spokesman said in an emailed statement that e-commerce "is set to be a major growth driver for the Indian economy and create millions of jobs in the future. Government policy changes will have long-term implications" in how that industry evolves. "It is important that a broad market-driven framework be developed through a consultative process in order to drive the industry forward," the spokesman said.
The statement did not address how the new regulations will directly affect Walmart's e-commerce plans in India.
The expanded online presence of Walmart and Amazon has not been welcomed in India, particularly by the tech and retail industries. Business groups have said the retail giants create unfair competition that could put locally owned stores out of business and stymie the growth of tech startups.
Walmart's international division reported a 2.6 percent drop in net sales for the third quarter. Brian Yarbrough, a retail analyst with Edward Jones, attributed the drop to Flipkart, "which is operating at a pretty big loss."
Walmart Chief Financial Officer Brett Biggs pointed out in the third-quarter phone call with investors that Walmart International's sales reflected Flipkart for about half of the quarter, as well as the retailer's retreat from operations in Brazil.
The news from India didn't seem to spook investors. Walmart shares rose $1.10, or 1.2 percent, to close Thursday at $91.51, on the New York Stock Exchange. The stock has traded between $81.78 and $109.98 in the past 12 months.
Business on 12/28/2018
Print Headline: Walmart's big plans stymied in India