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New FDI Policy Could Sink Rs 5000 Crore Of E-Comm

The new foreign direct investment (FDI) policy could make it difficult for Amazon India and Flipkart to sell inventories worth Rs 2000-2500 crore each, according to a report.

The Department of Industrial Policy and Promotion (DIPP) had earlier this week announced changes to FDI policy for the e-commerce space, effective February 1.

The change in policy will prevent e-commerce from selling their own products on their marketplace, and potentially stop massive discounts and cashbacks.

E-commerce companies buy their inventory of clothes, accessories and other soft lines of products about three months in advance, the report said. A rough calculation suggests that the two e-commerce players have each bought inventories worth Rs 2000-2500 crore, a source told the newspaper.

Executives at Amazon and Walmart-owned Flipkart are looking at ways to clear the stockpile, the report said. A number of sellers, including Cloudtail and RetailNet, are looking to discuss the situation with the companies.

“This is a big problem as they weren’t expecting a shock,” a source told. Deals with fashion brands typically involve supply of stock for three months.

“We don’t sell to these platforms unless they promise us a three-month stock purchase. They have monthly targets and we provide a certain rate based on the promise of that high volume,” an executive at a fashion brand told the newspaper.― Moneycontrol

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