New e-commerce FDI norms to bring 'level playing field': Domestic retailers

Photo: Shutterstock
The new changes to foreign direct investment (FDI) policy for e-commerce will bring in a ‘level playing field’ for brick-and-mortar retailers, said domestic retailers Business Standard spoke to.

 

The Union government announced new changes to the FDI policy for e-commerce, aimed at checking predatory pricing and deep discounting. The government barred e-commerce players from forcing vendors to have exclusive deals on its portals. The government also aimed at enforcing a cap of 25 per cent on the inventory that a marketplace entity or its group companies purchases from a vendor.

 

“The FDI-funded discounting was making it difficult for offline retailers and other players to sell effectively. These (new changes) will bring a level playing field in many categories,” said Rakesh Biyani, joint managing director, Future Retail. Biyani said the new policy changes will help domestic companies to build a robust business model.

 

The decision came in the backdrop of several complaints being flagged by domestic traders on heavy discounts being given by e- commerce players to consumers.

 

Many sellers had flagged concerns that the e-commerce giants were using their affiliates and exclusive sales agreements to create an unfair marketplace and offering some products at deep discounts.

 

Kumar Rajagopalan, chief executive of Retailers Association of India, an industry body of retailers, said Indian companies would get opportunities similar to what Chinese companies had received initially, which led to the building of Chinese giants such as Alibaba, Tencent, and JD.

 

“The government should appoint agencies to ensure compliance of norms and probe any flouting of norms and initiate action against such marketplaces,” Rajagopalan said. With the new changes, marketplaces will remain marketplaces and not act as sellers, he said.

 

According to the FDI policy on e-commerce sector, while 100 per cent FDI under automatic route is permitted in the marketplace model of e-commerce, FDI is not permitted in inventory-based model of e-commerce. “The new changes will definitely help multi-channel retailers,” said Vasanth Kumar, managing director of Lifestyle, a department store chain.


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel