100 Percent E-Commerce FDI in India: Everything You Need to Know

Brands like Amazon and Flipkart will have to revise their existing business models to comply with the DIPP guidelines

The FDI in e-commerce retail ruling ensures that marketplace sellers can open up their businesses to foreign investors. (Photo: iStockphoto)

In what could boost foreign investment in the e-commerce in the country, the government has allowed 100 percent FDI in the marketplace model. What does that directive mean for home-grown e-commerce players and should you forget about the deep discounts that you were enjoying so far?

What is E-Commerce?

What Does Marketplace Model Mean?

Here’s What the FDI Ruling Actually Means For Sellers?

An e-commerce entity will not permit more than 25 percent of the sales affected through its marketplace from one vendor or their group companies. 

<b><a href="http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf">DIPP Guidelines</a></b>

That means, sellers like WS Retail and Cloudtail for Flipkart and Amazon respectively will end up losing sales margins on the items sold.

However, e-commerce players which are entirely based on the marketplace models, like Snapdeal, the ruling offers them the chance to leverage their existing processes and grow them further.

Snapdeal welcomes the government’s move to provide clarity to India’s fast-growing e-commerce industry through the guidelines issued today. These guidelines recognise the transformative role that e-commerce marketplaces will play in the Indian market. It is a comprehensive announcement which will pave the way for accelerated growth of the sector in India.

Rajnish Wahi, Senior Vice President, Corporate Affairs and Communication, Snapdeal

Why the Silence, Flipkart & Amazon?

Top e-commerce retailers have refrained from speaking on the FDI ruling till now. We reached out to both companies for a response but their apparent caginess about commenting could indicate that they have some fire-fighting to do on their inventory-based models, in order to adhere to the DIPP guidelines.

So Long, Discounts?

As it turns out, the FDI ruling does not only come as a rude awakening to sellers but buyers as well. According to the guidelines, no seller has the right to revise the price of a product which ensures fair competition.

E-commerce entities providing marketplace will not directly influence the sale price of goods and shall maintain level playing field.&nbsp;

<b><a href="http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf">DIPP Guidelines</a></b>

This ruling could mean the end of special sale days like Flipkart’s Big Billion Day or special offers provided by the likes of Amazon, Snapdeal etc. In addition, sellers could be forced to sell products on their platform at prices much higher than what the Indian online shopper is used to. This is could bring brick-and-mortar stores back into the limelight.