FDI In Ecommerce: Snapdeal, Shopclues Support Reinforcement Of Press Note 3

With the Indian ecommerce industry witnessing global entrants such as Walmart, ecommerce companies such as Snapdeal and ShopClues have welcomed the government’s decision to reinforce the implementation of Press Note 3 for FDI (foreign direct investment), stating that it would facilitate a level-playing field for marketplaces as well as sellers.

These companies believe that the new rules will dissuade “malicious practices” being carried out by certain platforms for some “proxy sellers”.

This comes on the heels of several complaints and protests against ecommerce leaders Flipkart and Amazon for circumventing the norms of Press Note 3, which disallow one seller from selling more than 25% of the total products on the marketplace.

A ShopClues spokesperson said on the development: “The decision of having a regulator to reinforce the Press Note 3 is indeed a welcome move, which has a potential to leave no room for any marketplace to circumvent the intent of the law while possibly adhering to its letter. This will certainly facilitate level-playing field for all level of marketplaces and discourage any malicious practice carried out so far by any of the operators.”

An Inc42 email query sent to Amazon and Flipkart, who control 70% market share in the Indian ecommerce market, didn’t elicit any response till the time of publication.

Earlier, reports had surfaced that the government has decided to create a separate wing comprising officials from the Department of Industrial Policy and Promotion and the Enforcement Directorate to enforce implementation of Press Note 3, which deals with foreign investment in ecommerce.

The separate wing will be a temporary solution till the time the government prepares a national policy on ecommerce, for which the commerce ministry has formed a think-tank comprising industry members.

At the same time, the government is also mulling setting up a permanent regulator to deal with broader aspects of the industry such as FDI implementation, use and purpose of data collection by ecommerce companies, consumer protection, and other matters.

With players like Flipkart and Amazon dominating ecommerce for the past few years, Snapdeal and ShopClues have been struggling to improve their market share in the space.

In 2017, Snapdeal held only a 2.5% market share while ShopClues held 2.1%, compared to 40% held by Flipkart group and 32-33% by Amazon, according to Forrester.

“A level-playing field for small sellers will lead to balanced growth and will ensure that the gains from digital commerce accrue to millions of genuine sellers and not just to proxy sellers created by some marketplaces,” the Snapdeal official said.

Until now, India allowed 100% FDI in the marketplace model but not in the inventory-based model.

The development comes soon after a proposal was made by an ecommerce subgroup to the Centre. According to reports, the ecommerce subgroup is aiming to allow FDI in an inventory-led online retail B2C model.

It further proposed that ecommerce companies should stock products under the Make in India Campaign only under this amendment.

The suggestion to build a separate wing to implement Press Note 3 aims to remove ambiguity around the FDI guidelines and their misuse by ecommerce marketplace players. Offline retailers and trade bodies have been accusing ecommerce companies of violating the regulations by influencing prices on their platforms and illegally funding abnormal discounts.

[The development was reported by ET.]