Flash sale ban, DPIIT registration, other proposed amendments in E-commerce Rules to hit MSMEs: Experts

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July 20, 2021 6:31 PM

Ease of Doing Business for MSMEs: The amendments defined flash sale by an e-commerce entity as a sale of selective goods and services at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time with an intent to draw a large number of consumers.

It also noted that instead of prohibiting certain activities, an indicative list of unfair trade practices be included that the Central Consumer Protection Authority (CCPA) may investigate upon, for ensuring consumer protection.Higher incomes in rural India and changing online habits will help e-commerce in a big way.

Ease of Doing Business for MSMEs: Certain amendments proposed to the Consumer Protection (E-commerce) Rules, 2020 by the Department of Consumer Affairs last month to protect consumer interest and encourage fair market competition will ‘disrupt’ MSME sellers retailing goods on e-commerce marketplaces, according to industry experts. The key concerns highlighted in a round table on Tuesday organised by India SME Forum — an advocacy group for small and medium enterprises (SMEs) that represents over 86,000 MSME members – were the ban on flash sales by e-commerce entities, mandatory registration of such entities with the Department for Promotion of Industry and Internal Trade, appointment of various officers, etc., that would increase the compliance burden for sellers and consequently make it tough for them to adopt e-commerce.

“The government just pushed traders into the MSME definition. Traders feel they have an unfair ground due to reasons such as the price at which e-commerce sellers sell etc. So, they want to challenge e-commerce platforms. There are lakhs of MSMEs selling through e-commerce channel and creating their own marketplaces as well. However, such restrictive practices will ultimately work against small businesses. Whatever compliances Amazon, Flipkart, and others have to adhere to, the burden would automatically be passed on to the sellers,” Vinod Kumar, President, India SME Forum told Financial Express Online.

For instance, the government’s earlier mandate for e-commerce marketplaces to have ‘country of origin’ mentioned on goods sold on the portals was to be adhered to by such sellers to update information for their new and existing goods. Likewise, the ban on flash sales would impact sellers’ revenue. Such sales “allow many small sellers, artisans, weavers, craftsmen, homemakers to sell their goods around festive seasons at attractive prices. These sales are a big source of revenue for small businesses and if the changes are approved, these can hurt consumers as well as local and household sellers,” India SME Forum said in a release citing industry experts.

The amendments defined flash sale by an e-commerce entity as a sale of selective goods and services at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time with an intent to draw a large number of consumers.

“Electronics is a big category when it comes to online selling particularly during such flash sales in a given year. It also helps us recover for the rest of the year. Banning flash sales would certainly hit our business which otherwise attracted more businesses from offline to online,” Rakesh Kumar, Delhi-based retailer of laptop and smartphone accessories told Financial Express Online.

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“In terms of the cost of selling, we need to understand that when you place an excessive amount of compliance on any entity, a part of that burden does trickle down. With regard to the draft rules, a sizable amount of compliance burden will shift to small sellers,” said Nirupama Soundararajan, Senior Fellow and Head of Research at policy think tank Pahle India Foundation. Another issue highlighted was around DPIIT registration of marketplaces operating in India which according to experts will create a stringent burden for online platforms and may force them to change the way they conduct their business. “This will, in turn, impact sellers, who will not be able to use such platforms to their advantage.” 

“Online retail has empowered the consumer to select from a variety of brands and products. We need to figure out who we want to help with these policies, how we can facilitate and make sure that everyone is benefitting from the ecosystem instead of just a few players. The new norms should benefit the consumer regardless of whether they’re shopping online or offline,” said Ravi Bansal, Global E-commerce Head, Unyscape.

Currently, small sellers are able to avail these support services at competitive prices due to the low-cost business model offered by online platforms but due to the increased compliance burden of support service providers, small sellers will be unable to avail these services at cost-effective rates, experts opined. Moreover, “appointment of officers (Chief Compliance Officer, and Resident Grievance Officer), registration formalities, and submissions of proofs and documents will affect small sellers who conduct business through their own websites.”

“We enabled over 700 women last year to get them onto different marketplaces due to Covid-related shutdown of markets. We helped them onboard three-four different platforms and mentored them. Around 200 out of them were able to scale up businesses in the past eight months. Now if they face such challenges, there growth would be impacted,” added Kumar.

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