Enjoyed the flipkart’s Big Billion day sales? Got your mobile phone from Snapdeal during a flashing deal? Ordered your groceries from Amazon at a 50% discount? Well, all these ache din are over. Going forward you can’t expect the same rates and discounts online. There is no need to wait for the cashback’s and look for the prices to slash down because it might not happen. Thanks to DIPP (Department of Industrial Promotion and policy) which has allowed 100% FDI in E-commerce and on the other hand introduced two new regulations which are going to be a big game changers and hurdles for the E-commerce business game.
The government’s interest is purely to retain the traditional retail market in India. It is an acceptable truth that business has inclined more towards E-commerce these days and youth being the most attracted of all (it is estimated they alone give 56% of business). In order to reorganize the corporate structure plan of E-commerce business and also to prohibit the influence of these online retailers in service and prices DIPP has set two new policies which could eventually slow down the big discounts we see. Here is what you have to know about the two big blows.
Discounts outlawed – No authority for Retailer to decide the price
In a recent press meet RBI Governor has warned the E-commerce to slow down the discounts, he mentioned that E-commerce retailers are just getting the returns but not the profits with their discounts. So according to DIPP’s new policy, a retailer no more has the authority to decide the price of a commodity. However the manufacturer can decide if he wants to sell the product at a discounted rate. This will help the Retail market to sustain and there won’t be any huge differences in the online price and retail price. The compliance of this policy is questionable, when asked about this new policy to an executive of one of the India biggest Online player he simply mentioned it as “The nightmare”, he also quoted that “E-commerce industry is already facing lot of issues with Competition Commission of India (CCI) for the prices and it is sad that they mark the E-commerce prices as ‘Predator pricing’. We will think how to go ahead with this new policy”. When the business models were studied deeper there is a win-win situation of Online and Retail stores with this new policy. The success might depend on how people accepts the same.
Not more than 25% Of E-commerce sales should retain for a single vendor
This is another blow to the traditional structure of the E-commerce companies in India. To keep in simpler terms the FDI is allowed and legal only into the Market place led E-Commerce but not on Inventory led E-commerce. The Inventory led E-commerce is something the E-commerce companies will maintain a warehouse, buy products and sell them on their websites to the customers whereas the Market place led structure is something where the E-commerce websites stands as a bridge or intermediate between the seller and buyer. In India, mostly all the E-commerce structure is Inventory led model, though they don’t use their names. For instance, the biggest seller on Amazon is Cloudtail, which is a joint venture of Amazon and Infosys Narayana Murthy on other hand WS retail is the biggest seller on Flipkart whose roots are again on the name of Flipkart only. This two sellers comprise of more than 55% of total sales on the website. The new policy might not allow this anymore. However, there are some strong reasons behind the inventory led model as the market place led model might not give customer satisfaction every time. Though the big market giants haven’t commented about this policy, it is sure going to be structural change in the business model of E-commerce industry in India.
Finally a good thing – 100% FDI in E-commerce (Market place led model)
The DIPP has also given a thumbs up for the 100% FDI in the Market led model E-commerce industry. This will open gates to many on shore venture capitalists to invest in our country. This will also encourage youth to come into the E-commerce industry. Like every other good thing even this policy comes with ‘Conditions Apply’ tag. This policy is purely coherent to the Market place led E-commerce Industry. There are very few to be precise in our country with this model so the E-commerce future is full of surprises now.
So whether the discounts might take a big step or not, a common middle class person will always look to get a commodity for the best price. Until that best price is maintained he doesn’t actually bother whether it is a Retail purchase of Online purchase.
