After-Effects & Reception Of 100% FDI in Ecommerce

Editor | Sep 10, 2020

The last two years was all about how Indian ecommerce needs FDI in B2C segment desperately. The government has finally allowed 100% foreign direct investment (FDI) in marketplace format of e-retailing.  

Let’s find out the opinions of ecommerce players, retail industry and experts on this development.

The Happy Crowd

Etailers such as Snapdeal, Shopclues and AskMe Bazaar are elated with this news. Snapdeal’s founder Kunal Bahl lauded the government for recognizing e-commerce marketplaces’ significance and role in improving the country’s economy. Bahl feels that this move will fuel ecommerce industry’s growth in India even further.

Kiran Murthi, CEO, AskmeBazaar shared with IndianOnlineSeller, “This announcement is amazing and a clear vindication of our approach. We would like to take this opportunity to thank the government for clarifying this. The opportunity for AskMe is to never become a retailer ourselves or to ever compete with businesses who are our customers in the market but to build a platform that can be leveraged by everyone. We strongly believe that India will be a market of many small businesses and are very excited to see the rapid adoption and merchant response to our offerings.”

The happy crowd also includes Internet and Mobile Association of India (IAMAI), Retailers Association of India (RAI), PwC India, BMR Advisors, KPMG India, and Ernst & Young.

The All India Online Vendors Association (AIOVA) is also taking the latest development positively. “There was no official stand by GOI on FDI in ecommerce marketplaces. Secondly, they have also defined marketplace and inventory based ecommerce. This will help in bringing legislations and regulations. The main positive point is that the GOI has restricted sales to 25% from a single or group entity. This will curb the malpractices of companies whose agreements with marketplaces are not in public domain. We hope such positive steps will lead to bringing a regulatory body like rbi, sebi, irda, cerc in marketplace based ecommerce companies,” stated an email from Aiova.

Silent Zone

Flipkart and Amazon have maintained silence over the new FDI rule.

Homegrown etailer Flipkart never appeared to be excited about FDI in ecommerce. Now that it’s a reality, the company hasn’t released any official statement on it.

It’s probably due to the 25% cap on sales from single vendor as Flipkart’s WS Retail and Amazon’s Cloudtail sales will get restricted.

On the other hand, Paytm and Snapdeal couldn’t hide their glee as both call themselves pure marketplaces with no inventory or own seller.

Bahl tweeted, “Always a great feeling when you stick to the course that you believe in, pays off: Focusing on a pure marketplace and not doing inventory.”

Strong Opposers

While RAI, IAMAI and the majority seem pleased, the Confederation of All India Traders (CAIT) hasn’t changed their stance on FDI. It was against it and still is. Criticizing the decision, CAIT said that it would affect small businesses negatively.

The traders body released a statement that said, “It is deeply regretted (decision)…It is an irony that Prime Minister Narendra Modi time and again advocating empowerment of small businesses whereas on the other hand regular steps are being taken to disarm the traders from their business activities. It is nothing but a back door entry to global retailers which will facilitate them to side step restrictions in multi brand retail since e-commerce has no geographical restrictions.”

The National Association of Software and Services Companies (NASSCOM) too isn’t completely happy.

The association feels that 25% cap is restrictive by stating, “The industry might face difficulties in case of sale of electronic items, where a vendor maybe offering exclusive access to certain items or discounts. Marketplaces have no control on how a product is priced and only organise ‘sales’ where vendors participate.”

Outcomes of the guidelines issued by DIPP on FDI in ecommerce

Based on the views shared by everyone directly and indirectly associated with the Indian ecommerce industry, these are some definite & possible outcomes:

  • Accelerated growth of ecommerce industry
  • Will bring clarity and improve ease-of-doing-business
  • Indian ecommerce competitive landscape will change
  • It will prevent marketplaces from acting like retailers
  • Deep-discounting will no longer be possible
  • It will enable marketplaces to offer value-added services freely
  • Sellers will get a level playing field thanks to the 25% cap on sales and clear marketplace definition
  • A pure marketplace model will come into existence instead of a manipulated one
  • New investments will benefit consumers, small & medium industries and economy on the whole by creating employment opportunities

Online sellers, what’s your take on 100% FDI and the associated guidelines? Will it hurt your business? Or will it give you an equal opportunity to increase sales?


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Editor

Editor

Editor team is specialized in introducing the marketplace content targeting the Indian online sellers. They plan and coordinate to bring the appealing content for the small businesses on how to partner with the e-commerce sites like Amazon and Flipkart and strategies for improving their online business. 




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