New Delhi, March 30 2016 (updated April 1 2016): 100% Foreign Direct Investment is now permitted in India in the marketplace model of e commerce, government announced yesterday.
This will benefit global chains like Nike, Adidas etc while allowing Indian e-biz players like FlipKart, Big Basket and others to tie up with foreign partners for equity. A manufacturer can now sell retail products made in the country through foreign-owned entities, while single brand foreign retail chains can sell directly to consumers through e-commerce.
But there are a few ifs and buts and maybes. For details, the Press Note 3 of the Department of Industrial Policy and Promotion (DIPP) can be found here
NASSCOM welcomed DIPP’s guidelines to introduce 100% FDI in E-Commerce under the clause of automatic route for marketplaces. This is a clear indication, that the government identifies marketplaces as an electronic intermediary, operating a technology platform to facilitate sales and transactions between independent third party sellers and buyers. NASSCOM is extremely glad to see the reiteration of FDI policy ‘as is’ on the services sector, and also on sale of services through ecommerce. Add-on services like order fulfillment services that are offered to independent third party sellers on the platform can also be offered such entities. This will also help in ending certain misinterpretations and confusions occurring in the domain. It is also heartening to note that the government has clarified that the responsibility for products sold will rest solely on the seller, thereby clarifying the intermediary status of such marketplaces.
However, we believe that restricting sales of a vendor to only 25% of the sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items. The industry might face difficulties in case of sale of electronic items, where a vendor maybe offering exclusive access to certain items or discounts. Marketplaces have no control on how a product is priced and only organize ‘sales’ where vendors participate. This offers consumers with a variety of choices and also attractive prices, we hope that such consumer friendly practices similar to ‘sales’ being offered by retailers will not be restricted.
.Sanjay Sethi, CEO & Co-founder, ShopClues
100 % FDI in e-commerce is a great initiative for the marketplace format of e-commerce retailing as it will help attract foreign investments in the country. It will be beneficial for consumers and will help in supporting the vision of Make in India as well and also create more job opportunities in the country. The clarity of the definition of e-commerce and marketplace model categorically will allow many players (national and international) to enter the industry through marketplace route.
Anish Basu Roy- co-founder, Shotang a Bangalore-based cloud marketplace
I think it's a step in the right direction. FDI Investments in the ecommerce marketplace model stand to eventually benefit thousands of small businesses and suppliers through better market access and world-class technology. At Shotang, we firmly believe in leveraging on the power of the marketplace model.
Soumitra Gupta, CEO & Founder Togofogo India’s First Online Marketplace for Buying and Selling Box-opened, Refurbished and Certified Pre-owned Mobiles, Tablets and Laptops:
This is a great move and validation of marketplace ecomm potential in India. I am sure in the next phase we will see similar move for retailers who own the products they sell mostly, like us.
Neeraj Jain, Co- founder, Zopper, India's largest hyper local mobile marketplace
Given the economic conditions and the spread of offline (read: traditional retail) market, Zopper is a business model made for India. Our business model is an asset-light model founded on the strengths of India's existing massive retail infrastructure. We offer e-commerce like convenience to our buyers and enable them to discover and buy products from their nearest trusted retail stores, sitting at the comfort of their home or office. This brings out the true potential of offline buying and helps retailers set their footprint in the market.
The decision to allow 100% FDI in the e-commerce market place doesn't just show the government's clear intention to promote fair competition in the retail sector but is even giving a great chance to the hyper-local sector to step forward and help retailers to be back in business and not be trapped in the traditional e-comm cobweb. Putting a cap on deep discounting will bring an overall rationalism in the market, increasing profitability for hyper-local business models
Brijesh Lohia, Managing Director, Global Ocean Group
The recent announcement of 100% FDI in e-marketplace model will prove as a big impetus for the logistics industry. Many global e-commerce giants were waiting for this development to happen and, will now enter the market in a big way. There will be a lot of action happening in the market now, guaranteed movement of goods from one place to another in a local area, through exchanged of goods and services. The marketplace online platform is only expected to enhance consumerism-in every literal sense of the term. It will spread the tentacles of consumerism and shopping more deeply, by facilitating more convenience, and accessibility.
As a result, it will also mean much more action for the logistics industry. It will involve transportation of goods, at the consumer doorstep. In other words, the doorstep delivery concept is expected to take over the local areas and the local markets. It will be a hyper delivery model, which only expected to strengthen the logistics business. There will be more jobs, more workforce management, and better efficiency to deliver goods and services in hyper active market. Consumers will expect more, and more goods and service are expected to change hands online. It only means exciting times ahead for us
Chirag Haria, CEO of Aarogyam Energy Jewellery
We welcome this move by Modi Government, which has given clarity to this business model. There was no official definition of Ecommerce & Marketplace. This will be foundation for better legislation and regulations in Ecommerce. Allowing 100% FDI in Ecommerce Marketplace model under automatic route will enable investment in few marketplaces which are bleeding and looking for investments desperately. Restricting sales revenue to 25% by single vendor or its group entity is in favour of medium and small size Vendors who were not respected by giants. Marketplace will have to work shoulder to shoulder with small and medium size vendors to train and increase their sales revenue. Retaining good vendors will be crucial for every marketplace. This move will also help revive the brick & mortar stores who faced heat due to deep discounting by marketplace. This move will help in creating job opportunities directly and indirectly.
Kiran Murthi, CEO, AskmeBazaar:
AskMe offers core digital services like payments, shopping and delivery to its 15 million base of merchants who are currently using search and listing. In that sense, we have been working hard to build the required digital infrastructure that allows merchants to build their businesses online. This announcement is amazing and a clear vindication of our approach. We would like to take this opportunity to thank the government for clarifying this.The opportunity for AskMe is to never become a retailer ourselves or to ever compete with businesses who are our customers in the market but to build a platform that can be leveraged by everyone. We strongly believe that India will be a market of many small businesses and are very excited to see the rapid adoption and merchant response to our offerings