Department of Industrial Policy & Promotion has released a press note with an update to FDI policy.Â Key highlight of the policy was 100% FDI permitted in B2B e-commerce.Â With the focus on Make in India FDI in B2C e-commerce is permitted only if:
- A manufacturer sells its products which are manufactured in India through E-commerce retail.
- A single brand retail trading entity who has presence as Brick and Mortar decides to trade through e-commerce platform.
- Indian manufacturer is permitted to sell its own single product provided it manufactures at least 70% of its products in house and maximum of 30% from other Indian manufacturers.
Department has clearly defined marketplace-based and inventory-based model and where exactly FDI is permitted.Â At present 100% FDI is permitted in marketplace model of e-commerce.So, what is the difference between marketplace-based and inventory-based model?
A Marketplace model means e-commerce entity is only a facilitator between seller and buyer with no role to play in product pricing.Â Inventory model means e-commerce entity is the owner of goods and services provided on its platform which are sold to buyers directly by them.Â At present major e-commerce players like Flipkart and Amazon work in market-based model primarily so this means there will be no big discounts on offer in time to come.
This policy is made keeping the benefits of Brick and Mortar store operators and will create a level playing field for all.This policy also provides great opportunity to e-commerce entities like IndiaMart, Shopclues, Askmebazaar whose model have always been a facilitator between seller and buyer.
Now the question comes in what’s in store for entities like Flipkart and Amazon, the major positive out of the policy is they can now get more funds as Flipkart is incorporated in Singapore and Amazon is US based entity.
Why do we say end of grand sales, it is primarily because there is a very interesting clause in the Marketplace model which is, not more than 25% of the sales can happen from one vendor or their group companies. Both Flipkart and Amazon have their own sellers WS Retail and Cloudtail respectively and they account for majority of their sales and are key players during their Grand Sales and now with 25% cap their hands are tied up.Â And more so with the fact that these platforms are only facilitators between sellers and buyers; they cannot influence the pricing.