New FDI policy on e-commerce raises doubt over the future of online-exclusive brands

The changes in the FDI norms for online marketplaces have put exclusive electronic and smartphone brands in a tight spot. While they believe that the latest changes in the FDI policy may not necessarily affect them, most of them are seeking further clarity on the subject before taking a concrete step. Notably big electronic and smartphone brands like BPL, MARQ, Sanyo, Blaupunkt TV, Thomson, Xiaomi, OnePlus, etc, operate as online-exclusive brands on online marketplaces like Amazon India and Flipkart.

Now the FDI policy bars the exclusive sale of such products on online marketplaces, which will hurt their business. As per the new policy, the "e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only".

Some of these brands, however, think the policy will not affect them.

"The marketplace has no stake in our brands and hence we don't anticipate any business loss," Avneet Singh Marwah, CEO at Super Plastronics, told the Economic Times. Super Plastronics holds the licence for Thomson and Kodak TV brands in India that are sold on Flipkart.

The new FDI norms could also cause a confrontation between offline retailers and these brands in terms of pricing of products. "We are keen to continue online exclusivity to avoid confrontation with offline retailers on pricing and other issues which a lot of brands are now facing by selling through both online and offline," BPL's COO Manhmohan Ganesh told the daily.

Also read: Flipkart, Amazon may not be able to offer big discounts as govt tightens e-commerce norms

Brands like Xiaomi and Oneplus, which forayed into the country as online exclusive brands, are now spending big on retail expansion to gain the market share. Some other brands exclusively sell products on Flipkart and Amazon wholesale entities -- Amazon Wholesale and Flipkart India. They certainly need to adopt a new strategy to stay relevant in the market once the new norms are fully implemented.

Analysts say the new FDI policy will also affect the companies that were trying to enter the Indian market through the online route. It will now be difficult for online marketplaces to prove that such companies don't fall under the 'seller' category. However, brands selling their products online, as well as offline, may not be affected to a great extent, they believe.

Also read: Kishore Biyani hails new e-comm FDI policy; says Amazon, Flipkart can't build brands now

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: E-tailers, traders welcome new FDI policy; small vendors say 25% limit will deter entrepreneurship

Edited by Manoj Sharma