The new FDI norms in e-commerce came into effect from 1 February 2019. Industry experts have different views about the impact these have made on the online channels and brands
Touted to make sales in offline and online sales channels a level playing field for all, new norms for FDI in e-commerce were announced at the end of last year by DIPP. The norms, after announcement, had received mixed reactions from the ACE (Appliances and consumer electronics) industry.
Industry experts had clearly stated that the online channel, including the likes of Flipkart and Amazon, will easily cope with the new set of rules and regulations. They had said that the sales for both online channels and internet first brands will get impacted in the short run, but the recovery will not take much time.
Navkendar Singh, associate research director for India and South Asia at IDC, had told EFY, “Online heavy brands like Asus, Huawei/Honor, Lenovo, Realme will surely get impacted significantly in the short term. They have to start looking at efforts to mitigate this impact by spreading the portfolio and business across e-tailers and must seriously start the offline expansion to win the confidence of all the important offline channels.”
Scenario after implementation on 1 February 2019
Fast forward around 40 days from the initial announcement made in the last week of December 2018, and nothing much has changed. Regarding the impact of the new norms on online sales of consumer electronics sales Faisal Kawoosa, founder, Techarc, said, “The implementations have indeed impacted the sales. But what is more concerning is it is impacting the overall experience that these players were known for providing. As per our estimates, it has impacted 20 per cent sales for CE including mobile phones.”
It is worth mentioning here that several smartphones including the likes of Apple iPhone 2018 models had vanished from Amazon India portal for a short period of time. The iPhone models reoccurred on the same portal in a matter of hours or maximum a day. Similarly, Amazon’s own range of smart-speakers went offline and resurfaced for sales in under a day’s time. It is still unclear whether the moves were due to the new norms, or Amazon was restructuring the portal on its own.
Upasana Joshi, associate research manager at IDC India, told EFY, “The new norms have not changed anything on a drastic level. Everything looks sorted from e-tailers end. Talking in terms of smartphones, e-tailers will remain to be driving force behind the growth of the vertical for next two years on the least.”
How long will online channels and brands take to bounce back
Not many are aware of the fact that the changes in these norms are entirely new, but these represent the third version of the same. In short, it may be not be wrong to say that the e-retailers and brands had enough time on hands to re-arrange their sales structure to comply with the new norms.
It is worth mentioning here that Xiaomi, a China-based brand that is famous for its line-up of smartphones and LED smart TVs, had announced opening of 500 physical stores days before the new norms were announced. As a matter of fact, Realme, another online heavy smartphone brand had announced its expansion into the offline channel just weeks after the new norms for FDI in e-commerce were announced.
Upasan told EFY, “IDC is not expecting any fallout in number of sales made through online channels. These norms will only lead to some internal changes on the e-retailers side. There should not be a negative impact at all on the online sales industry.”
Is increased spending on consumer appliances in the offline channel possible?
Experts from the industry are of mixed views on whether the norms will give a boost to the sales of consumer electronics via the offline channel. Sales of consumer electronics and smartphones are largely driven by convenience and discounting. Online channel has proved that it is more capable of providing better discounts in comparison to offline channels.
OnePlus had recently said that it has no plans to leave Amazon as sales partner in India. Not only has the brand opened its exclusive experience center in Delhi last year, but it also retails OnePlus smartphones through its own website in India. Similarly, the likes of Xiaomi and Realme are selling their products line-up exclusively through a single e-retailer, as well as on their own websites.
Faisal told EFY, “One of the reasons why people buy online is because of the choices available. Many a times offline channels are not able to offer a user’s desired brand, model or colour. Whereas in online channels, one could easily specify to the Nth what he wants. The offline channel shall have to give confidence to users about the breadth of choice they have.”