In December 2018, the Indian government clarified its stand on the FDI policy for e-commerce sector, attempting to stop the onslaught of flash sale, discounts and cashback offered by online portals backed by foreign investment. It also stated that these online companies could not sell their private label brands on their own portals.
Industry associations like Confederation of All India Traders (CAIT), All India Online Vendors Association (AIOVA) as well as apex bodies like Retailers Association of India (RAI) welcomed this move. Hope abounded that a more level playing field could finally exist between online and offline retailers.
This appeared to be short lived.
On 3rd January 2018, the Department of Industrial Policy Promotion (DIPP) clarified that there are no restrictions on private labels being sold by e-marketplaces, less than a week after the government specifically prohibited such sales.
Thursday’s official clarification by the DIPP came after this. DIPP said, “Concerns have been raised that press note 2 (2018) prohibits sale of private label products through the marketplace. It is clarified that the present policy does not impose any restriction on the nature of products which can be sold on the marketplace.”
WE DON’T NEED NO ALTERATION
Retailers claim that this move was taken to benefit big etailers like Amazon India and Flipkart (now part of Walmart), which have over 30 private labels across 150 categories. In fact, a CAIT delegation led by its Secretary General, Praveen Khandelwal, met Union Commerce Minister, Suresh Prabhu, on 3rd January 2019 to convey the unflinching support of traders to the government on this issue.
The delegation also urged that no draft ecommerce be passed without any policy changes, and the government should not be brought under any pressure tactics of any vested entities. It stated that traders across the country would strongly oppose any move to change the policy to the advantage of these companies and distort the level playing field.
Informing the delegation that the government is actively working on the policy, which would be implemented once finalized, Minister Prabhu assured them that the government is committed to ensure level playing field for all stakeholders with fair competition opportunities and is opposed to any kind of malpractices. He also said that the government has its attention towards problems of small businesses and efforts will be made to provide them with better business opportunities.
NOT FAIR, CLAIM RETAILERS
The DIPP statement said as FDI is allowed only in B2B e-commerce, an e-commerce entity providing marketplace will not, directly or indirectly, influence the sale price of goods or services, which also renders such business as an inventory based model. Khandelwal believed that the recent clarifications are an onslaught on the unethical business practices followed by MNC etailers like Amazon and Flipkart, including predatory pricing, deep discounting, loss funding and exclusivity and they are sure to lose business, which is prompting them to oppose the policy.
Also, AIOVA publicly claimed that big etailers like Amazon, Flipkart, BigBasket and Grofers disrupt the FDI policy using the food retail trading policy (FRTP) route. BigBasket is a subsidiary of Supermarket Grocery Supplies (SGS), a wholesale company with FDI. So even though SGS is the owner of BigBasket’s trademarks, the actual ecommerce marketplace has been licensed to Innovative Retail Concepts (IRC), which has two directors and authorised capital of only INR 2 crore, it claimed. The association claimed that this helped it circumvent the law to conduct multi-brand retail operations.
On its official Twitter platform, AIOVA stated that IRC has a B2C turnover of INR 1300 crore, which is less than the INR 1500 crore of SGS. “It seems IRC is not working as a marketplace but as a retailer itself. Here a clear loss can be seen where IRC is making loss on its purchases for SGS. Both companies have declared a combined loss of 500 crores. It seems IRC entire capital is wiped out. Still it is doing business,” it said.
The association further held as per food retail permission, SGS could retail food products made in India. “They need to keep the inventory and accounting separate from other business. But wait, SGS is nowhere involved in B2C. Then what is the need of food retail license?” it asked.
Gurgaon-based entrepreneur Aakash Singh was disappointed that within a week the government gave in to the demand by major ecommerce giants. “These ecommerce companies will destroy the unorganised economy in the name of consumerism,” he said.
Retailers are especially uneasy about the government’s announcement to discuss the FDI policy with ecommerce majors closer to the deadline of the policy implementation, which is 1st February 2018. They are seeking an extension of this deadline and a likely capitulation by the government has not gone down well with the retail community.
The AIOVA has bluntly stated that if the DIPP provides this extension, it will be a spit on the face of Indian public. It questioned that DIPP refused to entertain their requests during their past conversations with the DIPP, so how can it change its policies for three to four companies?
Lucknow’s SR Sharma rued that the government did not give time because these companies in turn did not give to time to seller for better work.
Another retailer claimed that these online companies would find it very hard to leave India and questioned why can’t we have our own Alibaba? “Why do we need to be servants of the West? Why are we going through this digial colonization and selling out our country cheaply for no good reason?” he questioned.
These are just some of the concerns that retailers are voicing about the proposed changes in the ecommerce policy. Hopefully, the government will come up with a tactic that will be win-win for all stakeholders.