How Will The Proposed Ecommerce Policy Impact The Logistics Sector?

The long-awaited draft of National Ecommerce Policy has been prepared and brought into the public domain. An in-depth analysis of the proposed e-commerce policy draft makes a strong case for indigenous e-commerce enterprises and can have major implications for foreign-owned e-commerce majors based in India.

Here is an in-depth analysis of the 42-page draft vis-à-vis six broad issues – namely Data Security, Infrastructure Development, Marketplace Hygiene, Domestic Market Growth, and Export Promotion – and the key takeaways for e-commerce and logistics operators:

Data Security

The proposed policy draft has come up with several measures amid growing concerns to ensure local data security and privacy. It is mandatory for any business entity that stores data abroad to not share it with any third-party for any use case even with customer consent.

This includes any business or a government body (without the permission of Indian authorities) abroad. All e-commerce players must also strictly adhere to the IT Act 2008. It makes the security of personally identifiable information imperative. Business entities will be liable to punitive actions in case of violation or unfair trade practices.

The government is also going to bring a framework in force and impose a restriction on cross-border data flow including the one generated by IoT Devices in public places. Here, this is going to be a challenge for logistics operators, especially the ones building Logistics 4.0 infrastructure which directly or indirectly relies on foreign third-party services.

Infrastructure Development

The government has also made the development of physical infrastructure a core attribute of the proposed e-commerce policy. This includes capacity building of both physical and digital infrastructure. It also stresses on identifying and addressing limitations in RuPay-based infrastructure, branding, and quantitative deficiencies. This will drive virtually all transactions towards RuPay since market players will have to pay less service charge as compared to MasterCard and Visa.

The draft further highlighted the need to develop the physical infrastructure for a robust digital economy and suggested steps for developing the data storage capacity in India.

Ecommerce Marketplace Hygiene

For all ecommerce platforms, one thing is quite clear in the proposed policy draft. There needs to be transparency of terms between them and the sellers. With respect to logistics operations, both big and small ecommerce platforms can leverage the tech-driven services of logistics aggregators to enable better package collection and delivery to the end-customer.

The draft has also made it mandatory for the marketplaces to display the details of sellers supplying goods and services on their platform. Further, they have to process all payments for accepted refund requests of customers within 14 days of acceptance.

A Grievance Officer should as well be in place and redress complaints within one month of notification. Self-owned and group-owned entities, like Amazon’s Cloudtail, are no longer allowed favourable terms for warehousing and logistics.

It will provide high standards in terms of consumer and seller protection across each and every stage of an ecommerce transaction.

Moreover, a single regulatory authority will deal with end-to-end aspects and help everyone in the value chain, particularly the end-customers. Sellers will further need to display the entire break-up of the price for goods and services counting charges such as delivery, postage, and taxes. This will provide the desired impetus to cost-effective logistics players.

FDI And The Domestic Market

There has been a considerable emphasis on Foreign Direct Investment (FDI) in marketplace models. Any marketplace that accepts FDI (such as Amazon or Flipkart) can no longer exercise control or ownership of the inventory sold on their platforms. However, for small e-tailers, the only stumbling block is that if 25% of their overall inventory is sold via any of such platforms, it will be considered as an entity of the ecommerce marketplace itself.

So, the homepreneurs and suppliers will have to ensure that they do not sell exclusively on a single marketplace (it shouldn’t be their concern if they do not sell at any marketplace-based ecommerce platform at all). If they do, they will have to enhance their production capacity and invest in inventory to meet the new regulation.

Another welcome move comes in terms of unfair practices such as ‘Deep Discounting’, which is discriminatory for smaller e-tailers on a marketplace. Though it will considerably decrease discounts and in-demand features such as ‘free’ and ‘fast deliveries’ for customers, this measure will ensure that small e-tailers have superior alternatives to manage their supply chain.

They will be able to avail the services of alternative logistics vendors to drive cost-effective and quick time-bound deliveries. It will also empower small e-commerce platforms, which operate with limited capital, to come at a level playing field with their larger market counterparts such as Amazon and Flipkart.

The move will also discourage marketplaces that have been dodging the laws through their cash-burning model. Now, the services on an e-commerce platform – including warehousing, logistics, and financing – will not just be limited to preferred sellers and can be availed by all e-tailers.

Export Promotion

The government is, moreover, planning to increase the e-commerce export limit of INR 25K to increase the volume of outbound shipments. It will make high-value goods shipment more attractive via the courier model. Preferential treatment and imposition of customs duty on e-transmission for indigenous digital products will be retained in line with the international trade negotiations.

It is clear that the proposed policy will create a sense of mistrust amongst foreign investors vis-à-vis the Indian market. This is because of the lack of clarity and recurrent overhauls in the economic policy of late. Having said that, the policy has taken positive measures to boost domestic demand and ensure greater stability in the market amid growing international economic volatility.

It will definitely level the playing field within the e-commerce market as well as other verticals that directly or indirectly rely on it including the logistics sector. Now, it is just a matter of time before the changes become visible on-ground and boost our burgeoning digital economy.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.