New FDI Guildines May End Online Exclusive Deals and Private Label Sales

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A clause in the revised policy read, “E-commerce marketplace entity cannot mandate any seller to sell any product exclusively on its platform only.”

credits – the blue diamond gallery

The revised policy on foreign direct investment (FDI) may give a shock to several joint ventures owned by e-tailers in the country. This new policy, set to come into effect from February 1, 2019, has mandated that no vendor will be permitted to sell more than 25 per cent of its products on any online platform owned by a single e-marketplace company. Several smartphone models, LED TVs and other consumer electronics are sold exclusively through a single online market place in the country.

Tightened guidelines for FDI in e-commerce is the main highlight of the revised policy. Introduced in the country by the Department of Industrial Policy and Promotion (DIPP), this new policy will bar players, including the likes of Flipkart and Amazon, from selling exclusive online products. It seems as if the policy is targeted at controlling the alleged practice of influencing prices.

A tweet made through the official DIPP Twitter handle read, “E-commerce entities providing marketplace cannot exercise ownership or control over the inventory i.e. goods purported to be sold OR directly or indirectly influence sale price of goods or services & they SHALL maintain level playing field.”

Kunal Bahl, Snapdeal founder, expressing his views about the policy posted on Twitter, “Snapdeal welcomes updates to 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.”

A level playing field for all sellers

The new policy also states that any e-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold.

Another tweet by DIPP handle read, “Providing services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair & discriminatory. Such services will include but not limited to fulfillment,logistics, warehousing, advertisement/marketing, financing etc.”

Several appliances and consumer electronic goods including smartphones are sold exclusively on one or the other e-commerce portal in India. It is also to be noted here that many domestic sellers had complained about deep discounts provided by e-commerce giants in the country. Small retailers, traders and merchants had also shared the effect e-commerce giants were making on their business models.

Ashwani Mahajan, associate professor at University of Delhi, tweeted, “Thanks Suresh Prabhu and Ramesh Abhishek, Amazon and Walmart-owned Flipkart will suffer a big blow.” In another tweet he said,”Long awaited, much needed policy. End of road to predatory pricing. Will encourage e commerce and end malpractices.”

Relief for appliances and consumer electronics brands as well

This new policy may have come as a relief for appliances and consumer electronics brands as well. A clause in the new policy revealed by DIPP read, “E-commerce marketplace entity cannot mandate any seller to sell any product exclusively on its platform only.”

In other words, it simply means that sellers will be free to sell their products on any platform or marketplace. A person working at a smartphone brand in India said that the development is good for brands as well because they will get to leverage all the online channels for selling their products.

It is to be noted here that brands including OnePLus, MarQ, BPL, iFFalcon, Sanyo, Blaupunkt TV, Thomson, Amazon and Meizu are operating in India as online exclusive either through Flipkart or Amazon e-commerce portals.

No private label sales

The policy has also restricted e-commerce marketplace companies from selling private labels. The private labels in question here include the likes of MarQ. In general words, e-commerce companies that own private levels directly or indirectly, will not be allowed to sell their products using their platforms.

Another tweet posted by DIPP read, “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, cannot sell its products on the platform run by such marketplace entity.”

However, some industry people opine that the revised policy won’t be able to make any differences in the present marketing scenario unless implemented seriously. An individual who works as a product trainer with an appliances and consumer electronics brand said, “The policy looks good on papers, but it will only be able to make a difference only when it is implemented strictly.”

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