E-commerce FDI Rules: Companies Find It Difficult To Grow Private Label Business

Flipkart and Amazan are in a bind over what to do about their private labels, following the announcement of revised rules for foreign direct investment (FDI) in e-commerce. In an attempt to accelerate growth, these e-tailers had planned to make private labels a major part of their business. But the latest revised norms have made the matter more confusing for them, sources in these e-commerce giants told.

The revised policy on FDI mentions that online retail firms cannot have exclusive tie-ups with suppliers or seller entities. It also highlights they cannot influence the price of company-owned items. With these new regulations, selling private labels appears to be a violation of the law, the report said.

According to the report, these e-commerce majors are planning to license their private labels to other vendors. Private labels add approximately 10 percent of total sales for Flipkart and Amazon. “If brick-and-mortar sellers are allowed to sell their own brands, why should the online players be discriminated against,” an executive in an e-commerce company told the publication on condition of anonymity.

Amazon and Flipkart are expected to seek more clarity from the government on the revised e-commerce policy. “The present policy does not impose any restriction on the nature of products which can be sold on the marketplace,” the Department of Industrial Policy and Promotion (DIPP) had said in a statement.

The daily quoted an executive familiar with the talks in the companies as saying, “The question here is not about the nature of products but the owner of it.”

Many analysts believe that the changes made in e-commerce policy are aimed at shielding the interest of traditional sellers, adding that it would put some checks on cashbacks and freebies offered by e-commerce giants.―Times Now

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