The government’s decision to cap sales of a vendor on an e-commerce market place at 25% is a “reasonable” move, department of industrial policy and promotion (DIPP) secretary Ramesh Abhishek said on Thursday.
Abhishek also said an e-commerce player providing only a market place isn’t supposed to give discounts on products because it’s just a facilitator between sellers and buyers.
Earlier this week, the government defined the market place model in e-commerce retailing and allowed 100% foreign direct investment (FDI) through automatic route in such a format, seeking to end uncertainties over the FDI policy framework governing players like Amazon, Flipkart and Snapdeal.
However, to ensure that the marketplace model isn’t misused by e-tailers and the vendor base is truly broad-based, DIPP stipulated that an e-commerce firm would not allow more than 25% of sales effected through its market place from one vendor or its group companies. The DIPP also said: “E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.”
Some analysts interpreted the government move as an indication of the beginning of the end of the discount era in ecommerce.
Even the condition to cap sales by a vendor could have a serious impact on some marketplace e-tailers who mainly sell their products through their group companies online, said Paresh Parekh, tax partner (retail & consumer products) at Ernst & Young.