Get All Access for $5/mo

Has the Government Finally Woken Up to Support Homegrown E-tailers? Though the tweak or clarification in the policy will reportedly hurt Amazon and Walmart-owned Flipkart the most, domestic e-commerce players have welcomed this move as the level playing field

By Vanita D'souza

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Shutterstock.com

Just before the year 2018 ended, on 26th December 2018, the government reviewed its FDI e-commerce policy. Since then, the industry is divided into a hot zone between international and domestic players.

The notification, which is effective from 1st February, bars e-commerce players from selling products of companies they have stakes in. It also stops them from signing exclusive agreements products.

"An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity," the Ministry of Commerce said.

Take the example of Amazon, which has an exclusive agreement with OnePlus to sells its products. Similarly, a lot of smartphone companies such as Realme, Xiaomi, Lenovo, Asus or Huawei have exclusive agreements either with Flipkart or Amazon. Considering their orientation to digital platforms, these businesses are also likely to suffer

Though the tweak or clarification in the policy will reportedly hurt Amazon and Walmart-owned Flipkart the most, domestic e-commerce players have welcomed this move as a level playing field.

Home Grown

Even though with capital backup, Amazon and Flipkart helped the e-commerce sector's growth in India, by far it has been quite uneven. A lot of smaller players couldn't match up numbers as discounting models turned out to be really expensive for them

With the policy coming into play, players like Snapdeal, which felt the unicorns' pinch, see this has a ray of hope for smaller players.

In a comprehensive tweet, Snapdeal's Co-founder Kunal Bahl said, "Marketplaces are meant for genuine, independent sellers, many of whom are MSMEs. These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce."

While on the other side, the domestic industry also feels the governance, transparency and compliance with the industry was the need of the hour.

Harsh Chauhan, CTO & Co-Founder, MiniDukan opines that companies should provide a transparent platform to vendors and customers by enabling necessary compliance in their policies and business models. "Vendors need a platform which they can trust and not feel betrayed when e-commerce platforms launch their own private labels," he added.

The Conversation

Nonetheless, one of the most stressed points in the clarification is the clause which restricts the sale of products by any entity having equity participation by e-commerce marketplace entity or its group companies is expected to disrupt the existing plans of some big e-commerce companies and force them to make immediate changes.

Rahul Bahukhandi, Co-Founder, LaYuva says this review of policy on FDI in e-commerce has also brought the discussion back to what is an Inventory based model of e-commerce and what defines a Marketplace based model of e-commerce.

"The final draft of the e-commerce policy which is expected to be announced soon will provide more clarity and leave no scope for ambiguity."

For now, all we need to wait to watch is whether the government is willing to extend its February deadline or the likes of Amazon and Flipkart will have to tweak their business models.

Vanita D'souza

Former Senior Correspondent, Entrepreneur India

I am a Mumbai-based journalist and have worked with media companies like The Dollar Business Magazine, Business Standard, etc.While on the other side, I am an avid reader who is a travel freak and has accepted foodism as my religion.

News and Trends

Recur Club Announces Credit Offerings for Startups Beyond Series A and SMEs

In FY 24–25, the platform also plans to deploy an additional INR 2000 crores through its Recur Swift program for startups.

News and Trends

Uber Launches Moto Women in Bengaluru, Connecting Female Riders with Female Drivers

Uber Moto Women aims to ensure safety with real-time trip sharing, anonymised contact details, and RideCheck monitoring for irregularities. It also offers 24x7 priority support via Uber's Safety Helpline for women riders and drivers.

News and Trends

Talent, Digital Infra, Policy, and Startups Driving India's GCC Ecosystem

By leveraging its demographic dividend and evolving policies, India is uniquely positioned to become the preferred choice for global enterprises seeking scalability, resilience, and a future-ready operational base.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

News and Trends

Indian Venture Ecosystem Poised for Global Ascent: Recovery, IPO Resurgence, and 'Building for Bharat' to Define 2025

India's GDP is poised to scale from USD 4 trillion to USD 8 trillion over the next decade and will offer a playground that is remarkable for both founders and venture capital (VC) firms, said Pranav Pai, Founding Partner and CIO at 3one4 Capital.

News and Trends

FinX and FirstClub Raise Early-Stage Funding

The startups listed below have disclosed investment rounds.