India clears 100% FDI in Ecommerce Marketplaces with certain clauses

India clears 100% FDI in Ecommerce Marketplaces with certain clauses

As per the notification issued by government of India on 29th of March 2016, E-commerce companies in India can now have 100% foreign direct investment. Here are the important understanding and concluding points of the overall notification.

  1. Ecommerce Marketplace companies can have 100% FDI. So companies like flipkart, shopclues, amazon and snapdeal can have foreign funds of upto 100%. Question is except Amazon, all other major marketplaces are India based and hence why they will want 100% FDI. But for sure it may open way for new global ecommerce marketplaces like alibaba to have their presence in India. This will happen for sure. This also clears way of a total acquisition of an Indian ecommerce company by a foreign company.
  2. Ecommerce retailers can not have 100% FDI. A retailer is one who sells products from their own stock and inventory. While a marketplace is an online matchmaker between buyer and seller and provides a technology platform for same.
  3. No ecommerce marketplace can directly or indirectly influence the selling prices. If this guideline does not get manipulated in either way, will end the discount run of ecommerce business.
    • This will be a very good move for offline retailers who are suffering huge loss in sale due to deep discounts provided by online retailers
    • Online marketplaces may have to re-strategize their marketing policy as discounts were their USP till date. Since they wont be able to control the prices of vendors and bill the discount as marketing cost, would not be able to offer huge discounts to lure customers. Infact it is good form them to stop bleeding money all together and focus on different aspects of customer acquisition.
    • For consumers yes it would be a loss for a while as they may stop getting discounted products but this is in long term benefit of enduring economy of overall country. Or else it would have led to a disaster for overall economy because of uneven playing field for online and offline retailers and squeezed vendors.
  4. Ecommerce marketplaces can not sale more than 25% of their total sales from one vendor. Take for example Flipkart which has WSretail as their primary vendor and controlled by flipkart itself. So flipkart wont be able to sale products from WSretail beyond 25% value of total sale of flipkart. This will give way to other retailers and may also put another cap over discounting game. The rule applies to all companies of the group.
Govt of India clears 100% FDI in #ecommerce marketplaces. Click To Tweet

The overall policy is crafted in best interest of all players, government, consumer, country, offline vendors, online vendors. Only thing is to make sure it gets executed ethically and does not get manipulated by either of the party.

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