Understanding India’s Chilly Reception of Jeff Bezos
Jeff Bezos’s recent visit to India was marred by protests, an antagonistic remark by the Indian finance minister, and a refusal to meet by the Indian prime minister — all despite Bezos’s promising to spend a billion dollars and generate millions of jobs by 2025. What happened? The authors’ take is that at least one part of the Indian democracy is sending a loud and clear message: It is unwilling to welcome a multinational that disrupts traditional businesses and does so ruthlessly with alleged unfair trading practices.
Developing nations normally welcome CEOs of large multinationals who promise to invest in their countries and generate jobs. However, Jeff Bezos’s recent visit to India was marred by protests, an antagonistic remark by India’s commerce and industry minister, and a refusal to meet by the Indian prime minister — all despite Bezos’s promising to spend a billion dollars and generate millions of jobs by 2025. What happened?
Our take is that at least one part of the Indian democracy is sending a loud and clear message: It is unwilling to welcome a multinational that disrupts traditional businesses and does so ruthlessly with alleged unfair trading practices.
Amazon had $233 billion dollars of sales revenue in 2018, which is less than half of that of Walmart. Yet Amazon has a market cap of more than three times that of Walmart and draws fearful responses from smaller businesses. A growing number of small business owners feel that their dream of becoming big and profitable is getting more and more distant because of Amazon.
Amazon, on the other hand, argues that it promotes small businesses. It claims to have invested more than $15 billion in 2019 in infrastructure, tools, services, people, and programs to help independent third-party sellers — primarily small and medium-sized businesses — grow their online sales. It has created a range of small business academy programs to help small businesses harness the power of the internet to reach more customers, build their brand, and grow sales. It has instituted awards such as Small Business of the Year, Woman-Owned Small Business of the Year, and Small Business Owner Under 30 of the Year. It also claims to have helped hundreds of small businesses and created over 100,000 jobs across its last-mile delivery network. And it says that more than 50,000 small- and medium-sized businesses exceeded $500,000 in sales in Amazon’s stores worldwide, and nearly 200,000 surpassed $100,000 in sales.
Yet, it is also alleged that Amazon uses unfair and anticompetitive policies to smother competition. For example, Amazon followed a price-parity policy by restricting its sellers from offering lower prices on other online sales channels, a policy that was ended by a European Union ruling in 2013. In 2010, Amazon responded to a pricing dispute with the publisher Macmillan by removing its books from Amazon’s website. In 2014, it made Hachette’s physical books harder to get — delaying delivery time, eliminating discounts, or refusing pre-publication orders — leading to a plunge in Hachette’s sales. In 2015, Amazon announced a ban on the sale of Apple TV and Google Chromecast products, which many believed was meant to suppress the sale of products competitive to its own Fire TV products. In 2019, the U.S. Federal Trade Commission scrutinized a deal between Apple and Amazon that affected sellers offering low-cost and refurbished Apple products on Amazon’s site.
Furthermore, Amazon increasingly controls the underlying infrastructure of the online market by being the dominant platform for digital commerce. It also controls the majority share of cloud computing services and owns a large distribution network of warehouses and delivery stations in most major U.S. cities. In order to control the entire delivery chain from start to finish, it is expanding to shipping and package delivery for both itself and others, which would make it a serious rival to FedEx and UPS. It both competes with other companies and sets the terms by which these same rivals can reach the market, leaving those companies with little choice other than to comply with its terms.
With a significant portion of U.S. households subscribed to the Amazon Prime program, and with Amazon selling more books, toys, apparel, and consumer electronics than any other retailer online, the choices available to small business and retailers have dwindled. The result is that small retailers and suppliers simply acquiesce to Amazon rather than compete against it.
Thus, India’s antagonistic reception to Jeff Bezos should come as no surprise — it was a response to what independent retailers anticipate as a threat to their livelihoods. Thousands of local shop owners took to the streets to protest Bezos’ visit, holding signs “Jeff Bezos Go Back” and calling him and an “economic terrorist”.
India’s government scoffed at Bezos’s offer to invest $1 billion in the country, arguing that the amount was not a real investment, but merely funding to cover the losses caused by its predatory pricing. Praveen Khandelwal, the secretary general of Indian traders’ confederation, said: “Bezos and Amazon have already destroyed many small businesses and are now trying to build a false narrative of empowering small retailers.”
Bezos’s visit also coincided with an initiation of inquiry by the Competition Commissions of India (CCI), which investigates anticompetitive activities. CCI alleges that Amazon has adopted an anticompetitive model for e-commerce which consists of providing deep discounts and preferential treatment to a select few preferential sellers on its platform.
What does this mean for Amazon’s prospects in India and its $200 billion retail market? Only time will tell. But it’s clear that Amazon faces a challenge from the millions of small retailers who oppose it and have a significant voice in the current government’s policy making. It also faces competition from other retailers fighting for India’s growing online market share, including a local player with a reputation for working with small businesses rather than against them.
Maybe it will not be a winner-takes-all outcome for Amazon after all, and multiple niche players and small retailers will end up sharing the market. Perhaps government regulation will play a far bigger role than what Amazon has seen in the U.S. market. Or maybe Amazon will end up steamrolling the local retailers using its vast financial resources, as it has done so effectively in the U.S.
Correction: A previous version of this story misidentified the commerce and industry minister. The text has been corrected.
Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business and Faculty Partner at the Silicon Valley incubator Mach 49. He is the author of The Three Box Solution. His HBR articles “Engineering Reverse Innovations” and “Stop the Innovation Wars” won McKinsey Awards for the Best Article published in HBR. His HBR articles “How GE Is Disrupting Itself” and “The CEO’s Role in Business Model Reinvention” are HBR all-time Top 50 Best Sellers. Follow him on Twitter and LinkedIn.
Anup Srivastava holds Canada Research Chair in Accounting, Decision Making, and Capital Markets and is an Associate Professor at Haskayne School of Business, University of Calgary. He examines the valuation and financial reporting challenges of digital companies.
Luminita Enache is an Assistant Professor at Haskayne School of Business, University of Calgary. She investigates financial disclosures of new-economy firms.
Understanding India’s Chilly Reception of Jeff Bezos
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