SUMMARY
The latest changes in ecommerce FDI policy will come into effect from February 1, 2019
Amazon and Flipkart have sought an extension to the deadline
Come tomorrow (February 1), consumers shopping online on marketplaces such as Amazon India and Flipkart, may see higher prices and fewer discounts.
The revised rules prohibit foreign-funded ecommerce companies from sourcing goods from vendors in which they have a stake. The policy will also affect the ability of ecommerce marketplaces to forge exclusive vendor-partners products.
Amazon, for instance, is reportedly clearing out more than 400K items that account for nearly a third of company’s estimated $6 Bn annual sales in India, in order to comply with the new ecommerce rules set by the Indian government last month.
While Amazon has sought the deadline be extended to June 1, Flipkart has asked for six months to comply with the directives, as this would involve changes in their business model.
Some of the country’s venture capitalist (VCs) say that such stance by the Indian government is ‘unfair’ and also asserted the policy favoured large corporate such as Mukesh Ambani’s Reliance Retail.
“The marketplaces should be given more time. The rules are particularly designed to favour large Indian corporate or investors who have Indian money,” FE Online cited India Quotient founding partner Anand Lunia.
Lunia is of the opinion that while the policy prevents companies who have received FDI funding from favouring their sellers but the likes Ambani can still operate freely. Ambani who owns Reliance Industries Limited (RIL) has already announced to foray into ecommerce business. Recently, Aditya Birla Fashion’s Forever 21 also relaunched its ecommerce website.
Ivyvap’s Vikram Gupta also reportedly reiterated Lunia’s opinion about how the latest ecommerce policy is favouring the large corporates..
However, retailers’ body Retailers Association of India (RAI) has refuted these arguments.
“The government had cleared its intention from the beginning of not allowing FDI in multi-brand retail at all,” the report cited RAI’s CEO Kumar Rajagopalan.
[The development was reported by FE Online.]
