As the new year is about to kickoff, signs of a changed global online business environment are indeed showing presence. They will likely paint a different business picture for the coming months for retailer hopes to expand global wide platform presence.
Supply Chain Matters recently highlighted The Ferrari Consulting and Research Group’s ten 2019 Predictions for industry and Global Chains. Prediction Nine indicated that the positioning among dominant online retail platforms would meet the realities of geo-political forces and trade tensions in the coming year.
Our belief is that the ongoing tense geo-political environment including a rise in domestic market protections will mute any further aggressive expansion plans of either Alibaba, Amazon, JD.com, Walmart or others into other global market regions. Once more, in areas like China and India, domestic political forces and pressures would come to blunt prior aggressive growth ambitions.
This week’s international business new cycle has added more evidence to what is likely occurring.
The Wall Street Journal reports that India is now tightening restrictions on foreign-owned E-Commerce companies such as Amazon and Walmart after each has invested billions in online market presence. Up to now, foreign based platform providers were able to circumvent current regulations that call for domestic entities to only own inventory for online marketplace selling by having their local India affiliates assume ownership of that inventory. India’s Commerce and Industry Ministry has now indicated that as of the beginning of February 2019, the existing loophole will be closed , and further, that foreign companies such as Amazon will be barred from entering exclusive third-party sales agreements for various electronics manufacturers such as smartphones.
Thus, after investing billions in domestic online presence in India, the government seems to be changing the rules related to online merchandizing. Amazon itself has upwards of $10 billion invested in growth plans related to India.
The WSJ report indicates that these latest policy changes come as: “Indian policymakers have been looking for ways to rein in the power of American tech behemoths.” A spokesperson for India’s Commerce and Industry agency indicated to the publication that the new rules are aimed at promoting the growth of India’s E-commerce industry with: “fair and nondiscriminatory trade practices” and healthy competition.
The report notes that move comes in the midst of national elections that will be held in early 2019, and as owners of smaller domestic retail shops are feeling the pressure of more consumers turning to online platforms for goods purchases. Thus, domestic political forces in an election year have a lot to do with attempts to reign in foreign tech companies efforts to expand online presence.
The WSJ separately reported that: “After years of thriving under Beijing’s relatively light hand, China’s fast-growing technology sector is facing an unfamiliar situation: stepped-up government scrutiny.”
The report indicates that many of China’s powerful tech and Internet companies are now feeling pressures to fall in line with government mandates related to objectionable content and consumer safety. According to the report, the pressures of heightened scrutiny are compounded by China’s ongoing economic pressures related to declining growth. With the government having the ultimate power to be able to clamp-down on operation, Internet companies are reportedly being extremely careful in any expansion plans related to platform services without a sense of regulatory leanings.
The report summarizes that the trend of expanding government oversight will likely continue in the coming months.
Yet another separate report indicates that with the Chinese economy slowing, investors will become more cautious as to where they invest money, and that tech firms that do not demonstrate sustainable business models will take a hit. While the report reflects primarily bike-sharing start-ups like Ofo, which has received a cumulative $2.2 billion in investment funding, but lacking profitability. Recent investments have come from the likes of Alibaba as well as its financial arm, Ant Financial. With some Internet giants facing future write-downs of prior start-up investments, the premise is that many public investors will increase pressures for tamping down growth to profitable business lines.
Thus, as 2019 is about to kickoff, the signs of a changed global online business environment are indeed showing presence. They will likely paint a different business picture for the coming months for retailer hopes to expand global presence.
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