Changes in e-Commerce policy: A Hidden Opportunity

On December 28, 2018, the Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce, Government of India passed a new set of policies and introduced significant changes to its earlier policy (of 2017) which governed Foreign Direct Investments (FDI) in the e-commerce sector. The Indian retail landscape is economically and politically a sensitive one with stringent laws on foreign investment. E-commerce has been the only sector exclusive of the rule. But with the new regulations in place, it is largely going to change the dynamics of the Indian e-commerce industry.

Highlights of the policy:

Marketplace Entity (like Amazon) will have no ownership or control over the store inventory (of sellers).
The marketplace with run on an inventory-based model.
Marketplace Entity or its group companies cannot buy more than 25% from a single vendor.
Marketplace Entity cannot influence the price of goods and there will be a standard pricing model for all vendors.
Marketplace Entity will offer logistics and operational services to all vendors non-discriminately.
Marketplace Entity will offer cashback to all buyers without any discrimination.
Marketplace Entity cannot mandate the exclusivity of products to any vendor.

While the above policies remain strong for marketplaces, this could be a blessing in disguise for retail owners.

Let’s look at some of the benefits retails are most likely to gain out of this new policy:

With the inventory-based e-commerce, retailers will now have more control over their products and yet reap the benefits of a managed marketplace.
Since marketplaces cannot run their own discounts, retailers can set a pricing model as per their sales strategy as well as take control of offers and discounts.
Now that vendors will not be tied up by the exclusivity clause with the marketplace, they can spread their products across different platforms.
Most importantly, marketplaces will now be mandatorily required to submit a compliance document that abides by the policy guidelines on September 30 of every year. This will make the e-commerce landscape more transparent not only for vendors but also for end customers.

Overall, the current scenario creates opportunities for vendors rather than hindering their e-commerce business practice.