Instead of rolling out a liberal policy that will help retailers of all hues flourish and, in the bargain, fetch the country some chunky FDI flows, the government proposes to bring in restrictive clauses, among them one that will disallow bulk buying by sellers.
DIPP secretary Ramesh Abhishek asserting that FDI will not be allowed in B2C e-commerce ventures that keep inventory is supposed to assuage the apprehensions of bricks-and-mortar retailers, but will do nothing of the sort since it is just sophistry. Large players like Amazon and Flipkart—even before Walmart bought into it—are funded by FDI, and it matters little that they don’t hold inventory but are what is called a ‘marketplace’. Technically, the inventory stored in their warehouses belong to other sellers, but the e-commerce retailers control the activity on their respective marketplaces via the bulk purchases made by their associate companies, for instance a Cloudtail or a WS Retail. And it is because these associate firms are funded by FDI that they are able to pass on discounts to consumers; this was the point made by the Competition Commission of India (CCI) which pulled up Flipkart for its discounting practices even as it cleared the Walmart deal. What bricks-and-mortar retailers should be fighting for is a liberal FDI policy for multi-brand retail, one that allows 100% FDI as in the case of single-brand retail, and without the numerous caveats that have been tagged on. That then will give them the ammunition to fight their e-commerce peers.
Again, it is hard to understand what the DIPP secretary means when he says e-commerce should be driven by efficiency and not discounts. One would have thought only efficient producers would be in a position to offer discounts. And surely the government must realise there is little point in clamping down on discounts because the players will always find a way around it, as the CCI observed; indeed, even as the government publicly rails against such deep discounting, it has done nothing to check this in the four years it has been in power. Why shouldn’t consumers get the best deal if producers are willing to give them one? Shouldn’t the government be batting for consumers? Also, aren’t bricks-and-mortar retailers also discounting their merchandise?
Instead of rolling out a liberal policy that will help retailers of all hues flourish and, in the bargain, fetch the country some chunky FDI flows, the government proposes to bring in restrictive clauses, among them one that will disallow bulk buying by sellers. The draft