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Central Government Plan to control the industry  – Draft eCommerce Policy

 

The eCommerce marketplace in India has no doubt brought amazing trends and upgrades in the way we shop. But shopping online has recently become synonymous with Discounts.

This had become a big concern for the Indian government since the contribution of Indian online retail industry counts for more than 30% of GDP. To balance off the potential economic challenges that are clearly identified as loss of the majority of the income we can drive, the Indian government released a much-needed draft of eCommerce policies.

The Indian laws for online marketplaces were not so clear until just now. The central government has taken a great measure at monitoring the online marketplaces after looking at the acquisition trends under FDI (foreign direct investment) policies in India since 2015.

The Government Working Out on Trends

Since refining the foreign direct investment laws. The Indian government had a close eye on the performance and trends in the eCommerce platforms.

Acquisitions of big businesses like Paytm and Flipkart by foreign multinationals were the major instances that caught government’s attention and laid the foundation of this Draft policy for the Indian marketplaces.

The initial draft was made after close discussions with stakeholders in the ecom. industry of the country by the Union Ministry of eCommerce India. The draft clearly states the following…

“The online marketplaces are not to, directly or indirectly, influence sale prices. The policy gives a window for sales seasons, clearly defining the duration for which deep discounts will be allowed.”

This means the rainbow season for discounts, daily discounts, special offers, weekend dhamaka, cricket offers or any such offers and discounts are gone. Yay! The stores can still have festival discounts and offer that the Government has clearly laid out the periods for operations of.

Efforts are finally in place for having a fair business game between multi-vendor marketplaces and give a chance to the non-funded platforms to come up in the market and challenge the rulers of the industry.

The policy also targets the mergers and partnership schemes that big sites like Amazon and Flipkart’s were recently practicing. Acquisition by the whales in the foreign industry gives them an upper hand over providing discounts and products at cheaper prices compared to the original ones.

This brings us to the policy’s partakes over the FDI regulations.

FDI Regulations

The policy clearly also states that;

“Only the Indian owned and Indian controlled marketplaces shall be allowed to hold inventory, provided the products are 100% manufactured domestically”

For the Indian government, any business with less than 49% of FDI (foreign direct Investment) is considered as India owned marketplace. Hence, only these businesses are allowed to hold the inventory.

While it allows 100% FDI for any business.

This is an amazingly impressive policy wherein we do allow foreign marketplaces to invest in any Indian business to 100% of their funds but the business won’t be allowed to hold its credibility since, well, no Inventory!

Hence, more and more Indian businesses would concentrate on optimizing the current sellers and businesses rather than partnering with big foreign banks for funds and overgrowing their market values based on the investments.

On this Monday, Delhi Government issued a case against Amazon and Flipkart flouting the FDI rules to devise a strategy bringing in huge discounts, offers, and prices based on proxy sellers from the foreign funds. This results in an unfair game to other marketplaces in the business, not for long.

How Do We Make It A Fair Game?

According to FDI policy for the foreign investors in Indian marketplaces;

“FDI policies restrict marketplaces to sharing revenue collection more than 25%”

This FDI policy (back in 2015-2017) made eCommerce like Amazon and Flipkart to partner with a number of vendors/partners to ultimately increase the figure they receive from that 25%. They also worked out a smart white label reseller model under their own brands namely Amazon’s Cloud Retail and Flipkart’s WS Retail. Previously both of them have faced huge wrath from the old sellers on these platforms.

Now that the regulations are being imposed a major shift towards fair gameplay is expected in the Indian e-commerce. Where the marketplaces are strategically forced to focus on existing sellers and improvise on sharing values with the consumers rather than manipulating sales on the basis of cheaper prices than their competition.

Recent studies have already shown a slow down in onboarding new sellers and polishing the current seller services. Flipkart and Amazon say to have 2Lakh sellers while Shopclues has around 5Lakhs.

Who could have known that acquisitions like Walmart-Flipkart would come with a wave that not only monetizes the FDI regulations but improves the current ecosystems to better the countries economy?

Truly an amazing step my Central Indian Government for making a draft e-commerce policy.

 

Team
RG Consultants

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