Domestic e-commerce companies Snapdeal and ShopClues, social commerce startups including Shop101, and a bunch of online-only brands have come together to oppose any extension of a February 1 deadline for online marketplaces to comply with FDI rules.
This is the first time smaller online retailers have voiced their concerns to the government after last month’s review of norms on issues such as inventory and price control and equity ownership in vendors, which have hit their biggest rivals – Amazon and Flipkart – the most.
Many of these companies have written to the Department of Industrial Policy and Promotion and commerce minister Suresh Prabhu, lauding the government for clarifying the rules on foreign direct investment in the e-commerce sector.
The government’s Press Note 2 issued in December bars online marketplaces and their group companies from owning their vendors and prohibits them from controlling the inventory sold on their platforms. Amazon and Walmart-owned Flipkart sought a deferment of the February 1 deadline and industry officials said the government was weighing an extension of at least two months.
“An immediate and thorough implementation of Press Note 2 is important to ensure growth and survival of India’s small businesses through genuine online marketplaces,” said Kunal Bahl, cofounder of Snapdeal.
“I don’t think the deadline should be extended by even a single day. These are large companies, they knew what they were doing and their argument that the law will hurt SMEs is wrong,” said Sanjay Sethi, cofounder of ShopClues. “They have to be ready to stop selling products from their own sellers on their platforms.”
So far, opposition to an extension of the deadline had been led by groups such as the Confederation of All India Traders, offline retailer associations and online seller groups, which accused e-commerce companies of flouting norms to shore up their businesses and thwarting their growth.
Smaller e-tailers including Limeroad, Wooplr and Fynd have also written to the ministry and some online-only brands have raised concerns over the issue, said a person aware of the matter.
However, what’s tricky for some of these online brands is that they also sell on Amazon and Flipkart and don’t want to be seen as being hostile to them, said an online seller.
Flipkart has sought a six-month extension, while Amazon has sought four additional months to comply. Both have written to the DIPP and the commerce ministry explaining why they require more time to comply with the rules.
Press Note 2 states that online marketplaces can’t exercise ownership or control of goods sold on their platforms and neither can they influence prices. Entities in which e-commerce companies or their group companies own equity stakes can’t sell on their platforms. All online marketplaces are required to provide services to their vendors in a fair and non-discriminatory manner.
“We have, along with other seller associations, been demanding for this from the government for the past two years. They’ve finally given us what we wanted and should definitely not extend the deadline for online players to comply with the law,” said Arvinder Khurana, president of the All India Mobile Retailers Association.
Khurana said Amazon and Flipkart have adversely affected the businesses of offline mobile retailers by using their size to enter exclusive partnerships with brands while also doling out discounts to win customers.
According to RedSeer Consulting, over 40% of all smartphones are sold online and e-commerce accounts for a high double-digit share in sales of large appliances the country.
Leave a Reply