The new changes to foreign direct investment (FDI) policy for e-commerce will bring in a ‘level playing field’ for brick-and-mortar retailers, said domestic retailers.
The Union government announced new changes to the FDI policy for e-commerce, aimed at checking predatory pricing and deep discounting. The government barred e-commerce players from forcing vendors to have exclusive deals on its portals. The government also aimed at enforcing a cap of 25 percent on the inventory that a marketplace entity or its group companies purchases from a vendor.
“The FDI-funded discounting was making it difficult for offline retailers and other players to sell effectively. These (new changes) will bring a level playing field in many categories,” said Rakesh Biyani, joint managing director, Future Retail. Biyani said the new policy changes will help domestic companies to build a robust business model.
The decision came in the backdrop of several complaints being flagged by domestic traders on heavy discounts being given by e- commerce players to consumers.
Many sellers had flagged concerns that the e-commerce giants were using their affiliates and exclusive sales agreements to create an unfair marketplace and offering some products at deep discounts.
Kumar Rajagopalan, chief executive of Retailers Association of India, an industry body of retailers, said Indian companies would get opportunities similar to what Chinese companies had received initially, which led to the building of Chinese giants such as Alibaba, Tencent, and JD.
“The government should appoint agencies to ensure compliance of norms and probe any flouting of norms and initiate action against such marketplaces,” Rajagopalan said. With the new changes, marketplaces will remain marketplaces and not act as sellers, he said.
According to the FDI policy on e-commerce sector, while 100 percent FDI under automatic route is permitted in the marketplace model of e-commerce, FDI is not permitted in inventory-based model of e-commerce. “The new changes will definitely help multi-channel retailers,” said Vasanth Kumar, managing director of Lifestyle, a department store chain.― Business Standard