As is the case with any big economic reform, the new 100% FDI policy could bring major changes in how ecommerce companies function.
Now that there is a clear distinction between marketplace and inventory ecommerce model, the companies operating on both will have to pick one side. The 100% FDI rule applies to marketplace format and not to inventory-led. Not to forget the 25% sales cap from a single seller.
Therefore, companies with their own sellers like Flipkart (WS Retail), Jabong (Xerion Retail), Myntra (Vector e-commerce), and Amazon (Cloudtail) will have to change their business structure in order to adhere to the new regulations. There’s no room for ambiguity anymore, which will curb etailers from generating most sales and funding discounts via one (their own) seller.
“The new regulations leave less room for firms to flout law through alternate structures. The clear definition of e-commerce marketplace, inventory led business and the 25% sale norm will stop companies from disguising their businesses under marketplace model while they are doing inventory led business,” rightly stated Angshuman Bhattacharya, MD at Alvarez & Marsal India.
While marketplaces and fashion etailers are advised to restructure their set-up, Future Group’s CEO Kishore Biyani has gone one step ahead and declared that online grocery leader Big Basket should shut its operations.
He said, “As we speak, Bigbasket’s inventory-led model has become totally illegal as per latest government notifications. They don’t have any seller and directly sell to the consumers.”
Biyani always had a bone to pick with online players. Remember this Future Group’s campaign that mocked Flipkart, Amazon, Snapdeal?
His grouse: the heavy discounting trend started by etailers is destroying the traditional retail industry. “It’s all about money. The e-commerce guys have money to experiment – I don’t have this kind of money to blow,” Biyani had said in one of his interviews.
In spite of the disapproval Future Group partnered with Amazon and then had a fall-out in January 2016. Surprisingly he had predicted in mid 2015 that ecommerce models will change.
Coming back to the fate of inventory-led ecommerce companies like Big Basket, Zivame, Jabong, experts believe that there’s no need to panic. “Even these guidelines would not be considered as final and there will be more revisions. This was not meant to be a punitive measure but to bring more clarity. The government is not going to enforce this from tomorrow,” shared Mohan Kumar, partner at Norwest Venture Partners.
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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