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New FDI E-commerce Policy – Impact on Industry

New eCommerce Rule

Several Global Business Heads have raised concern over the evolving regulatory complications concerning the e-commerce sector in India and proposed for a stable policy administration for the robust growth and increased investment potentiality.

Considering the valid concern raised by the Global Busines Leader government has tightened the norms and New FDI E-Commerce Policy came into being.

The New change in FDI (Foreign Direct Investment) E-commerce Rules is designed to protect local businesses and vendors from Amazon, Walmart, Flipkart and others but this is a hard change for the foreign e-commerce firms in India.

The government has tightened the norms for Foreign E-commerce Firms to treat all the vendors equally as per the revised built FDI E-Commerce Rules for the well-being of businesspeople.

What is New FDI E-Commerce Policy?

The New FDI E-Commerce Rule came into effect on February 1, 2019, with the few major changes as new rule barred e-commerce firms to sell products of the companies in which they have the stake thus Flipkart, Walmart and Amazon are removing the product of the companies they have the stake in.

A vendor cannot gain higher than 25 per cent of products from firms of the same marketplace where they intend to sell them.

The government has also banned from entering into an agreement for the exclusive sale of products that could influence product prices. For Example, Xiaomi cannot sell Mi phones on Flipkart only, which is a very common tradition followed by the players during a new phone launch.

Impact of revised E-commerce Rules on Industry

How sellers are treated on the e-com platform? The position of e-commerce platform in the market was the major reason behind this huge change to make one stable and enduring law for the right practice in terms of vendor rights and business execution which will remain the same for all the vendors.

Restriction to Feature Product Exclusively

This new rules came into force for barring e-commerce companies from insisting a seller to feature products exclusively on their platforms, and restricting control over the marketplace’s inventory.

The government ensures that the revised modifications will promote favorable trade for sure and restrict foreign companies’ attraction in fixing domestic rates.

Equity Stake Constraint

Amazon holds the equity stake in Cloudtail so the items related to Cloudtail will no longer be available on Amazon India due to this change Amazon business and customers both are affected, this is the reason behind the delay in delivery and fewer discount offers.

25% Sale Control

25% sale limitation is a big challenge for the vendors who deal with a specific category of product, to maintain this ratio marketplace and vendors are affected badly as they are no longer eligible to sell more than 25% of their product on any particular marketplace.

This change will give chance to other vendors to participate in marketplaces plus all top players are now bound to sell their products on multiple marketplaces to maintain their profit this is going to be beneficial for the customers to order from any marketplace.

The Product related to the business Amazon having stakes in started disappearing from Amazon India to comply with the revised regulations from Thursday 31st Feb 2019.

Relaxation to Completely Comply

Amazon is not alone into this line, Walmart is also there which is affected by this revised rule as it opted a major stake in Flipkart. Amazon and Wallmart are requesting for 6-month relaxation to completely comply with the revised e-commerce rule.

Cessation

Now marketplaces in India are now insisted to follow the fair rules to treat all the vendors equally and this is a big step of Government to save Indian Vendors.

For sure the revised FDI rules are way hard to implement for all the marketplace models but good for the Indian vendors to come and participate with full right and control over the inventory and pricing.

 

 

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