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India's coronavirus lockdown to hammer Amazon and Flipkart sales

Online retailers are halting delivery of non-essential goods

Online retail is expected to take a major hit from India's nationwide lockdown.   © Reuters

MUMBAI (NewsRise) -- Amazon.com, Flipkart Internet and other online retailers in India are bracing for a slump in sales this year as they temporarily halt delivery of non-essential items such as mobile phones after the government imposed a three-week lockdown to curb the coronavirus outbreak.

Amazon said it is "temporarily prioritizing" its available fulfillment and logistics capacity to serve products that are currently critical for its customers. The priority items include household staples, packaged food, healthcare, hygiene, and personal safety, it said in a blog on Tuesday. "This also means that we have to temporarily stop taking orders and disable shipments for lower-priority products."

Rival Flipkart said it has suspended orders as it assesses the possibilities of operating in the lockdown. In an internal e-mail to employees, Adarsh Menon, a vice president at Flipkart, said the platform will first disable taking all orders and then start enabling categories in a sequential manner. "Leadership will evaluate how to get supply chains back in consultation with government and stakeholders. But as of now the platform will not accept any orders."

The move comes as Prime Minister Narendra Modi announced a countrywide lockdown for 21 days to arrest the spread of coronavirus. The government's drastic measures underscore fears of India's infection rate rising at a pace similar to other nations. The pandemic, raging through countries in Europe and in the U.S., has killed more than 18,900 people and infected over 424,000 across the world. India has so far registered 562 cases of coronavirus infections with 10 deaths.

The restrictions the Indian government has imposed also disrupted operations of several smaller online grocery delivery platforms such as Alibaba Group Holding-backed Bigbasket and Japan's Softbank-backed Grofers. The move comes at a time when Asia's third-largest economy is spiraling toward an economic slowdown. India's economy grew at the slowest pace in more than six years in October-December.

While the lockdown prescribed a total ban on people venturing out of their homes, a government advisory sought to exempt e-commerce delivery of essential goods such as food, pharmaceuticals and medical devices. Analysts expect a 60% to 70% slump in sales of e-commerce companies over the next three weeks.

Groceries and staples accounted for less than 10% of India's roughly $32 billion e-commerce market in 2019, according to Forrester.

"The impact of this lockdown is going to be massive. We are not expecting a demand revival before the festival of Diwali," said Satish Meena, a senior analyst at Forrester. The Hindu festival of lights that falls during October-November is marked by a sharp spike in consumer spending.

Meena said Forrester has scaled down its gross merchandise value growth forecast for the industry this year to 5% from 26%.

"The recovery is likely to take longer. People won't start buying smartphones or clothes or consumer durables in three weeks," Meena said. "We are expecting six months for things to stabilize."

--Dhanya Ann Thoppil

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