‘FDI in e-retail to bring in clarity, boost sector’

By: | Published: March 29, 2016 9:53 PM

Leading e-retailers, including Snapdeal, today welcomed the government's decision to open e-commerce market place for 100 per cent FDI, even as IT industry body Nasscom...

eCommerceThe government today, while allowing 100 per cent FDI in market place format of eCommerce retail, said these firms will not be permitted to sell more than 25 per cent of the sales affected through its market place from one vendor or their group companies. (Reuters)

Leading e-retailers, including Snapdeal, today welcomed the government’s decision to open e-commerce market place for 100 per cent FDI, even as IT industry body Nasscom termed 25 per cent cap on sales from a single vendor or group entities as “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 organise ‘sales’ where vendors participate,” Nasscom said in a statement.

Snapdeal said the norms will provide clarity to India’s fast growing e-commerce industry.

“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,” it said.

The government today, while allowing 100 per cent FDI in market place format of eCommerce retail, said these firms will not be permitted to sell more than 25 per cent of the sales affected through its market place from one vendor or their group companies.

“The announcement brings about the long overdue clarity on FDI policy, specifically the much debated marketplace model… The cap of 25 per cent on sales by a vendor on marketplace will ensure a broadbasing of vendors for a true market place,” PwC Partner and Leader Regulatory Akash Gupt said.

This may require some of the operators to go on drawing board to comply with the conditions, he added.

Sellers like Cloudtail and WS Retail account for major chunk of sales on Amazon and Flipkart, respectively.

Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran.

Similarly, WS Retail was set up by Flipkart co-founders Sachin Bansal and Binny Bansal in 2010. They sold off their stake in September 2012 and some former Flipkart employees own a large part of stake in the venture.

WS Retail accounts for a significant portion of products sold on Flipkart.

Emails sent to Flipkart and Amazon remained unanswered.

ShopClues CEO and co-founder Sanjay Sethi said the move 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,” he added.

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