“Why not foreign brands too?” – Indian Finance Ministry

Might come as a surprise to many of us today, but consumers in far-flung areas still use the good old postcard (yes, it’s not obsolete yet! ) under Value Payable Post or VPP to order for products which are out of their physical reach. Citing this example, the Indian Finance Ministry has suggested that single-brand foreign retailers should be allowed to accept orders via email and fulfill them accordingly.

Launched in the year 1877, consumers can use VPP to place orders by postcard and pay when the products are delivered. A finance ministry official shared the opinion that if VPP is permitted, online sales via email should also be permitted as it’s the same concept through a different technology platform.

To initiate the opening up of the online retail segment to foreign single brands, the finance ministry has written to the Department of Industrial Policy and Promotion (DIPP) to consider formal inter-ministerial consultations on foreign investments in the Indian ecommerce market. DIPP is the nodal agency for administering India’s FDI policy.

Recently, DIPP rejected French sports goods maker Decathlon’s proposal to be allowed to deliver goods of orders received through email. Decathlon had, in its application, mentioned that this would be justg another way to reach out to their customers, especially in the remote areas considering its resellers were already selling its products online. Decathlon currently operates 11 stores in India and about 500 worldwide with sports products ranging from running shoes to mountaineering equipment.

In 2006, single brand retail sector was opened to FDI for upto 51%. The next phase of liberalization allowed foreign investors to invest upto 100% on the condition that goods would be sourced locally. Under the current FDI policy, FDI is not allowed in business-to-consumer (B2C) category, whereas 100% FDI is permitted for business-to-business (B2B) category. Also, single brand retailers having FDI are not allowed to do any form of single brand trading, including ecommerce.

Opportunity for Indian online seller

Foreign retail brands have a dedicated consumer base. Those with 100% ownership will have to source goods from within India. In addition to their existing products, they might be open to adding more local products to their offerings to entice the Indian consumers.

Global retailers like Amazon have proved their success in the country and initiated many opportunities for local sellers to increase their sales and capitalize on the retailer brand loyalty with customers.