Amid the continuing farm protests, with the farmers completing almost three months camping at the borders of Delhi, the international news agency Reuters published a report based on multiple internal documents of Amazon regarding its India operations over the last few years.[1] Amazon is a global e-commerce giant, and it has already achieved close to $10 billion annual sales (value of merchandise sold) in India. Its CEO is supposed to be one of the richest persons on the planet. What do the documents reveal?
In short, the documents reveal the huge difference between the public face of the company and the actual reality when it comes to complying with government policies and regulations. The documents contain directions and inputs for the senior staff as to what they should claim in their meetings with the Indian officials and policy makers. At the same time they inform top Amazon executives that the company has been systematically flouting many of the Indian regulations and policies, and hence the outcome of the corporation’s actions has been exactly opposite of what those policies were supposed to achieve. All the while, the company publicly proclaimed that it was wholeheartedly supporting and promoting the stated policy objectives.
In spite of the obvious significance of the revelations, there has hardly been any talk in the Indian media about them and about the conduct of Amazon beyond perfunctory reporting of the Reuters story (and even there highlighting what an internal Amazon note had to say about PM Modi’s personality, rather than the substance of the revelations). We will take up a brief analysis of the Amazon revelations, situate them in the long debate on e-commerce in India, and then discuss why it is so important to link it with the on-going policy debates and protests across the country.
Handful of sellers account for overwhelming bulk of Amazon sales
The documents reported by Reuters provide us a glimpse of how Amazon was paying only lip service to changing Government policies and regulations over the years, window-dressing its actual practices. The Government in turn had to make those changes because of the concerted pressure and protests of the multitude of small retailers who have suffered irreversibly because of the capture of markets either by large retailers like Big Bazar and Reliance or by e-retailers like Flipkart and Amazon.[2]
For instance, a 2019 Amazon document recommended that an official should highlight that Amazon had committed more than $5.5 billion investments in India, and it provided an online platform for more than 400,000 Indian sellers. But he was cautioned not to divulge that a mere 35 of them (that is, a paltry 0.009 per cent of the sellers that Amazon claimed were benefitting from its platform) accounted for around two-thirds of Amazon’s online sales! The note flagged the latter information as “Sensitive/not for disclosure”, Reuters revealed. More importantly, just two sellers accounted for around 35 per cent of the platform’s sales revenue in 2019. And even more interestingly, the documents show that Amazon held equity stakes in each of these two sellers; thus the two could not even be deemed independent sellers on the Amazon platform – exactly opposite of what the global corporation claimed.
The report further brings out that these selected retailers were chosen for special treatment by Amazon, such as providing them discounted fees and helping them cut special deals with global suppliers like Apple. Though Amazon claims that the sellers operate independently, the documents reveal that the corporation exercises significant control over the inventories and the prices that some of the major suppliers offer. Originally it had one such major supplier that, for all practical purposes, was floated by Amazon itself with a joint stake from one of the founders of Infosys, Narayana Murthy, through his private investment arm Catamaran. In the documents Cloudtail is referred to as SM, that is, “Special Merchant”. One of the documents states that the objective was to, “Launch, stabilize, grow Special Merchant (Cloudtail) (and) make it profitable”; the target was to ensure that Cloudtail accounted for 40 per cent of Amazon India sales, “and build this into a $1+B(illion) business” by 2015. Amazon helped Cloudtail “acquire key relationships” and cut exclusive deals with companies like Apple, Microsoft and OnePlus to sell their products, such as smartphones. In March 2016, Cloudtail’s share of sales on Amazon.in was around 47 per cent, another document shows.
Maintaining appearances of protecting small sellers, while actually doing the opposite
Why did Amazon need to show that it was treating all its suppliers equally and had no special relations with any one of them, and that it had no control over any of their inventory or pricing policies? Because, whatever you and I may think of Amazon, Amazon India needed to claim that it was a ‘market place’ and not really a retailer, as ‘foreign’ e-commerce companies in India (such as Amazon and Wal-Mart-owned Flipkart) are not allowed to sell directly to customers. So they enter as merely digital platforms, marketplaces, where others can sell their wares. They are only there to help them digitally display their goods, transact with customers, and pack and deliver the goods to the customer. This confounds our common-sense, given Amazon’s regular announcements of sales, its daily advertising pitch, and the kind of discounts that they offer, but this is how Amazon has portrayed itself, at least on paper, as the Government’s rhetoric all along has been that it intends to protect small retail shops.
Instead of changing its practices and bringing them in line with the Government regulations, global giants like Amazon are more used to ‘influencing’ State policies and make them pliable to what they have been doing or they intend to do. Moreover, even when regulations exist that global corporations consider inimical to their interests, more often than not State agencies simply turn a blind eye to them being openly flouted, that too not once or twice, but day in and day out. The very existence of the likes of Amazon would be at stake if the policies are followed rigorously and the regulations enforced.
Due to persistent allegations of such a ‘special relationship’ between Amazon (as also its competitor Flipkart) and a few retailers like Cloudtail, in March 2016 the Government announced that no single retailer should have more than 25 per cent of total sales of the platform (note that this capping of 25 per cent itself makes nonsense of any idea of being a market place giving equal importance to all the sellers. Imagine a physical market with lakhs of sellers with 25 per cent share of a single seller!). The new rules also required that an e-commerce platform “will not exercise ownership over the inventory” sold on its site. Internal company documents show that Amazon was effectively treating Cloudtail’s inventory as its own at the time. In a May 2016 document, for instance, the company explains that “we will need to move a subset of this selection” of smartphones from Cloudtail “to other sellers” to comply with the 25 per cent limit. Hence, it moved part of its inventory of mobile phones from Cloudtail to Amazon Wholesale, a wholesale business-to-business operation in India which did not fall under the foreign investment restrictions, as it was not a business-to-customer operation. So instead of the inventory formally being moved from Cloudtail to the customer, now it was moved from Amazon wholesale via another ‘third party’ front seller to the customer; so much for regulations!
Meanwhile, in June 2016, Amazon CEO Jeff Bezos received a business leadership award from PM Modi at a U.S.-India Business Council event in Washington. There Bezos emphasised how small Indian sellers were benefiting from Amazon, and announced his further investment plans for India.
In response to the new 25 per cent limit on a single seller, in 2017 Amazon floated a second special merchant named Appario, in addition to Cloudtail, and it intended to control almost half of its sales through these two special merchants. Referred to as “SM2” in an internal document, this time Amazon entered into another joint venture with an entity backed by the family of Ashok Patni, a pioneer in the Indian IT outsourcing sector. Another internal Amazon document of 2019 states that the two special merchants got “subsidized fees” and access to Amazon global retail tools that they used for things like inventory and invoice management.
With national elections due in 2019, the NDA government made further policy pronouncements for e-commerce to appease the small retailers and sellers. In December 2018, it announced new restrictions that prohibited vendors in which marketplaces have an equity interest from selling products on these marketplaces. For example, if Amazon owned shares in a firm, that firm could not sell its goods on Amazon. The aim was to deter deep discounting by big online retailers, and hence take away their undue advantage. The new limits forced Amazon, at least on paper, to further restructure its relationships with Cloudtail and Appario, the two special merchants in which it held indirect stakes. As company documents showed, the two at that time accounted for around 35 per cent of Amazon’s online sales. From what is apparent to the bare eyes, in spite of all such policy changes and pronouncements and the demonstrated intent of the regulators, Amazon (and even Flipkart) have literally continued with business as usual.
“No consequences for breaking the rules”
In a detailed analysis of the rising e-commerce industry and all the hype associated with it, this is what we commented on the 2016 policy changes for e-retail:
It is obvious that e-retail simply cannot function, given its present practice, even if these new guidelines are broadly enforced. There is likely to be business as usual and some further window dressing on the part of e-commerce entities, or may be more e-commerce friendly policies at some future point of time…. One of the most important points of the new policy is that ‘e-commerce entities will not directly or indirectly influence the sale price of goods or services’. As we have seen earlier, discounts/predatory pricing is one of the main reasons for e-commerce’s ‘success’, and not being able to dictate prices will simply mean total collapse of their business model! Not surprisingly, the New York Times recently commented,[3] “Analysts and internet executives in India say they do not expect an immediate government crackdown on Amazon and others, and it is not yet clear what the consequences would be for breaking the new rules.” It further reported ‘business as usual’ at Amazon: a mega mobile sale at March-end and a ‘spring sale’ for electronic products with discounts ranging from 25 to 80 per cent across sellers (including Cloudtail) in early April.
In the four years since then, till these revelations emerged, there has been no real attempt at policy enforcement, as the New York Times had correctly anticipated.
Lessons for the Indian people
Inherent in this brief Amazon story are major lessons for the Indian people. The Prime Minister and the Finance Minister have become the greatest cheerleaders for big capital. They threaten to hand over the whole of the Indian economy to the hands of such capital, whom they refer to as “wealth creators” (whereas they are simply very successful wealth accumulators, whose wealth is generated by the labour of working people). In this situation, the significance of these revelations ought not be lost on a discerning reader. In the retail industry the consequences are obvious – the turning of a blind eye to regulations has meant further squeezing of small players, on the one hand, and consolidation, on the other, as rules of the actual game have increasingly become more favourable for the big monopolies, whether de facto or de jure.
Note that this is precisely what farm protests are all about: that critical aspects of the farm supply chain will be further corporatised and monopolised, making it impossible for small and marginal farmers, who are the overwhelming majority, to operate. And this is not some distant speculation. Observe the recent battle between Amazon and Reliance to get control over Big Bazar of Future Retail and Tata’s acquisition of Big Basket; at the centre of this flurry of activity by big business is the consolidation and control over India’s vast grocery business![4] In fact, given the timing of the present revelations, it is not unreasonable to infer that their being leaked has something to do with the ongoing Reliance-Amazon battle for shares of India’s retail market.
To conclude, the farmers are correct: recent policies and new laws will lead to their further marginalisation and even decimation while corporates further consolidate their gains, with little actual oversight by the State. And where will the farmers go? Earlier a displaced farmer could open a shop or drive a rickshaw. But now, as the small shops and rickshaw operations become unsustainable with rise of Amazon-Flipkart and Uber-Ola, where will all these people find alternate livelihoods? How many more of them can become delivery ‘boys’, work at ‘fulfilment centres’ (e-commerce warehouses), or become Ola-Uber drivers?
If they want to prevent such a fate, the people of this country need to actively seek alternatives. For this, they must first and foremost not think of each of these as an isolated, stand-alone issue that is somebody else’s ‘problem’. As the Amazon revelations signify, we ought to see the interconnections among the current trends, such as monopolisation of retail, the move towards large-scale privatisation of the PSUs, and the three farm laws. A new order is being forged under the leadership of big global capital, where common folk are to be divested of their meagre assets and livelihoods, without any other opportunity, and are to have an increasingly marginal role in the polity. Sections of the common folk appear to have understood this, and are resisting it. Much will now depend on others, too, understanding what is at stake.
Notes
[1] Aditya Kalra, Special Report: Amazon documents reveal company’s secret strategy to dodge India’s regulators, Reuters, February 17, 2021. https://www.reuters.com.
[2] This Reuters report itself states that the share of online sales of smartphones has jumped from 10 per cent in 2013 to 44 per cent in 2019, forcing many of the physical phone stores to close their shops.
[3] Nick Wingfield and Vindu Goel, “Amazon May Violate India’s New Rules on Foreign E-Commerce”, New York Times, 7/4/2016. http://www.nytimes.com.
[4] See for instance these two recent news reports: Mark Faithfull, Amazon, Reliance, Walmart And A Billionaire Battle To Dominate Indian Retail, Forbes, Feb.24, 2021. https://www.forbes.com; Shreya Bose, Tata Triggers Online Grocery War With Amazon, Reliance; Buys 68% Stake In Big Basket! Trak.in, Feb 17, 2021. https://trak.in.
(The author teaches at IIT-Kanpur.)
