SUMMARY
Amazon and Walmart feel the draft ecommerce policy is “heavily tilted” against foreign firms
Amazon has already committed $5 Bn investment in India
Walmart also signed an agreement to acquire 77% stake in Flipkart for $16 Bn
These are tough times for US-based ecommerce giants Amazon and Walmart in India. Both of them have dug in their heels deep in India with big investment commitments, but the recently proposed ecommerce policy draft has left the two foreign companies on shaky ground. The duo may now seek help from the US government in this regard.
According to people privy to the matter as cited by an ET report, “Amazon and Walmart feel the draft ecommerce policy is ‘heavily tilted’ against foreign firms and are likely to ask the United States government to reach out to Indian policymakers in case the final policy is ‘not moderated’.”
People familiar with situation expect a lot of government-to-government talks to happen if the existing draft proposal is approved by the Indian government.
Ecommerce Policy Draft Proposal: Quick Overview
Here are the six key pointers discussed under the Indian ecommerce policy draft:
Protection of user data: In the wake of the Cambridge Analytica-Facebook scandal, ecommerce companies are to be mandated to store all data pertaining to Indians within India itself.
Restriction on discounts: There have been complaints that ecommerce companies are influencing shoppers with heavy discounts and cashbacks on back of deep-pocketed investors, thereby creating an uneven level playing field.
Locally favourable ecommerce policy: The draft suggests that the Indian government should give more impetus to ‘Make in India’ products, and, thereby, extends more benefits to companies dealing in Indian-made products. For instance, inventory led models can store only Indian products and not outsourced ones from foreign countries.
Focus on customer complaints: According to the ecommerce policy draft, a separate wing within the Directorate of Enforcement should be appointed for the handling of ecommerce complaints and issues from customers.
Registration of all ecommerce platforms: Ecommerce portals in India are expected to register with the e-Central Consumer Protection Authority (CCPA), which will be soon be established to monitor the industry.
More power to founders: The draft policy seeks to give more control and power to the founders of the ecommerce business, rather than investors.
Analysts View On Ecommerce Policy
Analysts suggest that the proposed suggestions in the ecommerce policy draft are likely to slow down the pace of growth for Amazon and Walmart in the Indian ecommerce space. The duo has invested billions of dollars here in the last few years.
Amazon has already committed a $5 Bn investment in India through its different subsidiaries — Amazon Pay, Amazon Now, and Amazon Prime, among others.
In May this year, Walmart also signed an agreement to acquire 77% stake in Flipkart for $16 Bn.
Meanwhile, retail representatives believe that there is no need for a new ecommerce policy. Kumar Rajagopalan, CEO, Retailers Association of India (RAI), said that the policy for regulating marketplaces issued via Press Note 3, by the then commerce minister and secretary of DIPP, Amitabh Kant, was well-drafted and only needed to be implemented to ensure a level playing field.
In a recent interaction with Inc42, Rajagopalan said that retail is all about multi-channel and the laws that apply to one channel should be the same for others channels as well. Business to Consumer (B2C) is retail, irrespective of the channel— online, offline, direct selling or TV — it is conducted on.
“The Press Note 3 was created on the basis of an RAI submission. However, the RAI was not invited to deliberate on the new ecommerce policy, the reasons for which are not available to us. The government needs to ensure adherence to existing regulations rather than keep tinkering with the policy unless it intends to further divide retail by channels and compound the confusion in the FDI policy for retail in the country,” he added.
Industry opinion on the ecommerce policy apart, the most important question is: Is the proposed “level playing field” in Indian ecommerce meant to help the $200 Bn sector grow or will it spell the death knell for the flourishing industry?
The Indian online shopper is still not very mature and purchases are still primarily driven by heavy discounts and cashbacks rather than convenience, unlike in the west. So, discounts are important for ecommerce platforms to compete against the primacy of brick-and-mortar shops in India.
Not only this, restricting benefits to ecommerce players handling made-in-India products and cutting out foreign players is likely to impact cross-border ecommerce in the country significantly.
With the new ecommerce policy putting in place so many checks and scope for interference in decision-making, will companies be able to achieve scale and pass on the benefits to customers in the long run?
We doubt it.
