The government's notification reviewing the Foreign Direct Investment (FDI) policy in e-commerce has received mixed reactions from the industry and economists. While some called it a game changer, others criticised it as a "nonsensical" idea, which will ultimately hurt consumers.
Under the new norms, online marketplaces like Flipkart and Amazon India can no longer sell products of the companies in which they have a stake. The new policy also prohibits these e-commerce companies from entering into an agreement for the exclusive sale of products.
Calling it a "game-changer" decision for Future Group, company Chairman Kishore Biyani said: "This is not really a policy but more of a clarification and every retailer will have to adhere to it. They (online marketplaces) can't build brands now," Biyani told the Economic Times.
Also read: Kishore Biyani hails new e-comm FDI policy; says Amazon, Flipkart can't build brands now
Snapdeal, which lost the pace amid a discount war between cash-rich Flipkart and Amazon in India, also welcomed the new FDI policy on e-commerce. "Marketplaces are meant for genuine, independent sellers, many of whom are MSMEs. These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce," Snapdeal co-founder Kumal Bahal tweeted.
Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT), also appreciated the move, saying it will put an end to the "predatory pricing policy". "In the wake of foul play of global players in adopting all kind of tactics to control and dominate retail trade of India through e-commerce, today's clarifications by the government will prove to be an embargo on such practices," he told the BloombergQuint.
Also read: New FDI policy on e-commerce raises doubt over the future of online-exclusive brands
Arvind Singhal, the founder of Technopak, said the move is against the very tenant of commerce. "Several points in the (new) policy are non-sensical, if I may say so. What is deep discounting- is 50 per cent discounting deep and 30 per cent not deep? And what is meant by the point that every seller must get equal treatment? This goes against the very tenant of commerce. Each supplier and buyer have preferential relationships based on strategic reasons," Singhal told the Business Standard.
Not content with the new e-commerce rules, Walmart-owned Flipkart said in a statement today that the government policies will have a lasting impact on the e-commerce sector, which can create lakhs of jobs in India. Amazon has not said anything about the notification so far, but it is not likely to be pleased with the new policies either.
At the other end of the spectrum, National Co-convenor of Swadeshi Jagran Manch, Ashwani Mahajan, thanked Commerce Minister Suresh Prabhu for tightening the norms of e-commerce sector via Twitter, commenting that the step will be a big blow to online retailers like Amazon and Flipkart.
"The government's move comes after local traders complained that they were being put out of business because of steep discounts these e-commerce companies offered." Mahajan tweeted.
"The government's move comes after local traders complained that they were being put out of business because of steep discounts these e-commerce companies offered." Mahajan tweeted.
In a notification on Wednesday, the Commerce and Industry Ministry tightened norms for e-commerce firms like Flipkart and Amazon and barred them from selling products of the companies in which they have a stake.
The new policy says that "an entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity".
Also read: Flipkart, Amazon may not be able to offer big discounts as govt tightens e-commerce norms
Edited by Manoj Sharma