India has given the go-ahead to 100% FDI or foreign direct investment but whether the Internet companies are going to be happy about this, remains to be seen. Will this step be appreciated by the Internet companies and does our country’s stance get positive reception from the e-commerce marketplaces?
You may not be aware but the approval FDI in e-commerce has laid down two conditions that need to be looked into carefully. No seller or group company has the right to pay up for more than 25% sales made on the website and the second condition laid down demands that the discounts are now taken as forbidden. The high profile events that involved considerable risk like the Independence Day sale by Amazon, and Big Billion Day sale by Flipkart has been a sought out affair by the online customers during the festive season because of the fantastic discount deals offered. These regulations of “no funding discounts” will definitely leave plenty dissatisfied.
The Department of Industrial Policy and Promotion has released a note that confirms “E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.” These two stringent regulations will definitely hit the e-commerce firms of India like Snapdeal, Amazon India and Flipkart very hard.
It was their deep discount offer that was luring the customers to make purchases online and customers tended to ignore stores that were selling their products offline. What about the innovative “promotional funding” tactics that funded discounts by sellers? The funding discounts now seem to have been prohibited and thus the imaginative ways used by Snapdeal, Flipkart and Amazon India may no more see light of the day.
Basically Amazon used to finance discounts and in turn suggested the discount amount to its sellers which the sellers chose to maintain. The seller in turn includes the “discount amount” that they had been offering on toys, electronics, apparel or any other product, in the debit note that was sent straight to the Amazon offices for retrieval. A cheque used to be dispatched by Amazon and the seller could then cash it.
WS Retail Services Pvt Ltd is the single seller associated with Flipkart that produces almost 25% of sales of the company, making it the largest seller, and on the other hand Cloudtail India Pvt. Ltd is said to contribute even more for Amazon India. New seller entities may have to be chosen by Amazon India and Flipkart it seems from now onwards. Let’s see how this affects the online sales of these e-commerce giants?
