Internet shutdowns: Amazon, Flipkart may have lost 18-20% business

E-commerce companies like Amazon, Flipkart witness at least 20% decline in business due to internet shutdowns in India, say sources

Intermittent clampdowns on the internet in December are learnt to have significantly affected online commerce as well as digital payments companies, apart from telcos, in the country.
 
Though none is talking about the extent of the losses, industry sources say e-commerce majors such as Amazon and Flipkart may have witnessed an 18-20 per cent decline in their business volumes this month.
 
December is usually a busy month for e-commerce companies because the bulk of their business is driven by year-end and festive shopping. A day’s shutdown can heavily affect sales, added sources.
 
The companies were expecting huge sales in tier-II and tier-III cities and towns in the country, said an industry source.
 
Amazon and Flipkart could not be reached for their comments.
 
Mobile data services were suspended in parts of the country as security was intensified in several cities and towns amid nationwide protests against the new citizenship law.
 
The e-tailers sold less in places such as Uttar Pradesh, India’s most populous state; the Northeast region, including Assam; and parts of Karnataka and the National Capital Region, where the authorities banned mobile internet services recently.
 
The impact has also been huge on digital payment companies.
 
Another industry source said many e-commerce companies have told the government that internet shutdowns were hurting their business.
 
“We don’t know when these protests would stop and a number of other issues might also come up, but banning the internet is not the best solution. The authorities are using it very frequently,” the person said. “This is certainly not a sustainable model and they have to find other ways to take care of security.”
 
However, these problems are perceived by the authorities as permissible collateral damage to maintain law and order in the country. Telecom licensees have to abide by government orders to suspend/shut down the internet.
 
A report by the Indian Council for Research on International Economic Relations last year estimated the average hourly loss for India over various shutdowns during 2012-17 at $186,332 (around Rs 13 crore). The same report estimated that 16,315 hours of internet shutdown in India cost the economy approximately $3.04 billion (Over Rs 21,000 crore) in the same period.
 
“In this digital age and connected world, where the internet has almost become an essential commodity, any disruption of services, especially during the busy holiday season, certainly has an adverse impact on the trade of not only consumer internet companies but also fintech businesses as well as offline players,” said Ankur Pahwa, partner and national leader, e-commerce and consumer internet at EY India.
 

According to Satish Meena, a senior forecast analyst at Forrester Research, internet shutdowns have affected both ecommerce and digital payment companies. “There is a direct impact on the digital economy which is not good for the users. Because, if it happens very frequently, then the users would look for other options than relying on these entities (Amazon and Flipkart),” added Meena.
 
The stakes are very high for e-commerce companies such as Flipkart, Amazon and Paytm to function smoothly in the country.
 
Walmart, the Bentonville-based company (in Arkansas) is locked in a battle with US rival
 
Amazon for dominance in India’s online retail market through Flipkart, which it acquired for $16 billion last year in May.
 
Jeff Bezos-led Amazon committed a $5 billion investment to India in 2016 and has been rapidly expanding its business in the country’s e-commerce market, which is expected to touch $200 billion by 2028, from about $30 billion last year.
 
The impact of internet shutdown is not limited to big traders or e-commerce companies but it is equally impacting small businesses which have any dependence on the internet. While telecom operators lose out on millions of subscribers seeking recharges due to the shutdown, millions of subscribers end up losing out on value due to shift towards monthly recharges across telcos and other payments they cannot process during this time.
 
While state governments have disabled Internet services in the past to maintain law and order or prevent misinformation from spreading during sensitive times, this is perhaps the first time internet services are being impacted at such a large scale in different parts of the country, simultaneously.

With inputs from Neha Alawadhi in New Delhi