The Indian eCommerce industry is going to change both dramatically and drastically from 1st February 2019. The reason behind this is the Modi government’s new policy for the eCommerce industry. The eCommerce policy in India is designed by considering all the eCommerce marketplace which have foreign investment.
Amazon & Flipkart are the biggest names in it. So, this e-commerce policy is designed in such a way that many are going to get help and many are going to get affected adversely.
The prime motto of this eCommerce policy is to exterminate “PREDATORY PRICING” & “DEEP DISCOUNTS”
In the past few years, Brick-&-Mortar seller, Traditional sellers, Local shopkeepers have suffered a lot due to these promotional practices. Even thousands of business have been closed as they were not able to sustain due to deep discounting and predatory pricing.
What will change in the new eCommerce Policy?
So, what exactly will be changed once the policy gets implemented?
As per the new rule of the eCommerce policy, no eCommerce marketplace can sell their own products on their website and any entity related directly or indirectly won’t be able to sell the products as well.
And, above all, how much one individual vendor can sell on a particular website or eCommerce marketplace is also defined now.
No preferential treatment can be provided to any brand, supplier, and product from now onwards.
Under this eCommerce policy, cashback, exclusive sales, brand launches, preferential services or programmes such as Amazon Prime and Flipkart Plus could run into difficulties.
“The eCommerce policy is designed to create an impartial marketplace and provide equal opportunity to sell and promote a product”
- But is it really true?
- Will market become unbiased for everyone?
- Will everyone get equal opportunity?
- Who will benefit the most and who will bear the damages?
So, who will become the winner and who will be a loser by the implementation of this eCommerce policy?
Let’s discuss the Loser first!
Who will lose the most?
Loser #1 – The Hot Shots
With the implementation of this eCommerce policy, the most impacted entities or most negatively impacted entities are Amazon & Flipkart. Because both these marketplaces lure the customers by means of deep discounting. Customers do a lot of shopping on these websites due to these attractive offers and low price which won’t be possible any further after this eCommerce policy.
So, after reading and analyzing this policy, it looks like someone has analysed the working mechanism and business model of these websites. And, created a master-plan to kill them systematically.
But why?
I think the idea behind this is to promote homegrown players and provide them a better & equal opportunity. As far as I know, the only big homegrown player or the would-be homegrown player is “RELIANCE”, as it is coming up with its own eCommerce website.
Loser #2 – Related Parties
There is a rule in the e-commerce policy that any company which has invested in that e-commerce platform or have any relation directly or indirectly will not be allowed to sell its products on that platform. Even if the company has control over the inventory of the marketplace then also it won’t be allowed to sell on it.
In simple words, Cloudtail on Amazon and WS Retail on Flipkart won’t be able to sell anymore. Almost every seller has to compete with marketplace owned companies like Cloudtail & WS Retail and beating them in their own game is not an easy task as these companies always have privileges.
Actually, Cloudtail is a joint venture of Amazon and Narayana Murthy’s Catamaran which sell its products on Amazon. Being an Amazon company, it always gets preferential treatment and sellers face a lot of competition from it which will be reduced in the future.
So this is a piece of good news for sellers as they don’t have to compete with related parties of the e-commerce marketplace.
Loser #3 – Associate Brands
Inventory based provisions is another addition to this eCommerce policy in India. Inventory of a vendor will be deemed to be controlled by the eCommerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity.
Thus, as per the rule no brand can do exclusive deal with any website. Recent example is One Plus 6T, it is an exclusive brand launch deal on 1st November 2018 with Amazon. So these kind of deals will not be feasible from now onward. This will prevent any brand or supplier aligning exclusively with one marketplace, as is usually the case with many mobile or white goods brands.
Loser #4 – Online Shoppers
Now let’s talk about buyers, or online shoppers i.e. “WE”. We will not get any deep discounts, no fast delivery and cashback. Yes…all those products which we purchase on heavy discounts or cheap price will not be available after this eCommerce policy.
Online Shoppers – The “BIGGEST LOSERS” out of all.
Because these are unfair and unethical practices under the norms of this eCommerce policy. So, ultimately as a customer or as a common people, we are the biggest loser. This is the greatest negative impact on us as we use to buy products with heavy discounts on these websites which is no longer possible.
Looser #5 – Few Small Seller
Like I mentioned, no vendor can sell more than 25% of its inventory on any marketplace. So, this will impact the small entrepreneurs, small business, especially those who do business from home or home business. Because you have to increase your production capacity.
Suppose you sell 10 products earlier and out of those, 4 products get sold that means you have sold more than 25% of your inventory on eCommerce marketplace. And, it will be considered that your inventory is managed by Amazon or Flipkart or whichever the platform is.
This will become a dicey or problematic situation for you to increase your production capacity and remain within the limits of 25%. This is going to be a huge challenge for small sellers especially those who do business from home.
Loser #6 – Impact on Investment and Jobs
This eCommerce policy will definitely discourage foreign investment in India. Amazon has already invested billions of dollars in India and recently Walmart acquired Flipkart in $16 billion. These MNCs have already invested billions of dollars in India for warehousing, and jobs in logistics services.
Due to implementation of this eCommerce policy, definitely these companies will be impacted negatively and they will reduce the investment. Subsequently, jobs will get reduced dramatically.
In India, negative impact will be there on foreign investment and jobs for sure.
So far, we have discussed who are the losers due to implementation of the eCommerce policy .
Let’s discuss who will emerge as a winner:
Who will Benefit by the implementation of this eCommerce policy in India?
Winner #1 – Brick-&-Mortar Seller
In the past few years, if someone was hit hard by online shopping website or e-commerce marketplace, it was the Brick-&-Mortar sellers or traditional sellers. The impact is so high that lakhs of sellers have closed their business. Why they closed it?
Heavy discounts, ease of buying without stepping out, and convenience of product return are the reasons for the closure and it almost kills their entire business. However, the new guidelines restricting discounts and cashback might help brick-and-mortar retailers retain customers.
Winner #2 – Smaller eCommerce companies
Companies like Snapdeal, Shopclues which don’t have a huge corpus of money to compete with giants like Amazon & Flipkart now have a chance to compete with them. They can now compete neck-to-neck with Amazon & Flipkart. They will surely try to en-cash this opportunity.
Winner #3 – Small Sellers
Small seller like you and I, who are contesting the preferential treatment meted out by Amazon & Flipkart to their entities like Cloudtail of Amazon & WS Retail of Flipkart, have reason to cheer. These companies are not allowed to do any selling on these platforms and every service like warehousing, logistics, etc. of any eCommerce website will be available to every seller. Also, all the sellers would be equally eligible for third-party promotions.
Thus, everything will be impartial, unbiased, and everyone gets an equal opportunity. So, it’s good news for small sellers.
Finally, these are the winners and loser once the eCommerce policy gets implemented.
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