E-tailers, traders welcome new FDI policy; small vendors say 25% limit will deter entrepreneurship

E-commerce firms and trade groups on Wednesday appreciated the new rules for the sector, noting that the norms would help create level playing for all sellers. But small vendors are a worried lot over the condition on vendors to sell only 25 per cent of their products through an e-commerce platform.  Commending the new guidelines, Snapdeal founder and CEO Kunal Bahl in a tweet said, "Snapdeal welcomes updates to FDI policy on e-commerce. 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 there was no comment from Flipkart, e-commerce firm Amazon India said, "We are evaluating the circular". A senior executive of an e-commerce firm, who did not wished to be identified said the move could adversely impact investments being made to bring new sellers on board.

The monitoring and compliance mechanism of the new policy has been questioned by All India Online Vendors Association as the existing policy already bars e-commerce companies with foreign ownership from selling its own inventories and influencing pricing of products on its platform.

"Instead of investigating violations by particular companies in existing Press Note 3/2016, government has washed their past sins and formed new policy.

It will be years before government investigates or penalises them. Now this compliance is conveniently postponed to September 2019," a spokesperson of All India Online Vendors Association said. Small and medium-sized vendors appreciated the norm barring e-commerce firms from discrimination among vendors in any form but questioned the feasibility of its implementation by platforms.

Also read: Flipkart, Amazon may not be able to offer big discounts as govt tightens e-commerce norms

"Rule directing e-commerce companies to end discriminatory practice is highly appreciable. They either promote their products, firms owned by them or big brands that can pay well. Government should clarify on how will it ensure compliance of these rules," Kavi-The Poetry Art project co-founder Amit Singh said. He, however, said government should re-think on posing restriction on vendors from selling only 25 per cent of product from an e-commerce platform.

"We are in home decor segment. Most of our products are sold through e-commerce specialising in home decor compared to sale on general e-commerce platform like Flipkart and Amazon. Government should think about segment specific sales and re-think on imposing 25 per cent restriction," Singh said. Children accessories maker Nappy Monster's co-founder Sumantha Rathore said that 25 per cent sales restriction will be deterrent for small vendors who work from home and are entirely dependent on sale from a specific category website.

"Small vendors like us will need to enhance production capacity, investment in inventories to meet the requirement. With 25 per cent sale restriction, a small handicraft vendor selling 1,000 units through a nice commerce platform will need to invest in inventory to produce 4,000 units. This will deter entrepreneurship that e-commerce firms have created by blocking capital," Rathore said.

The revised norms are aimed at protecting the interest of domestic players, who have to face tough competition from e-retailers having deep pockets from foreign investors, according to the ministry of commerce and industry. The policy would be effective from February 2019. Traders body CAIT said if the steps are implemented in proper spirit, mal-practices and predatory pricing policy and deep discounting of e-commerce players will be a matter of past. The CAIT also demanded introduction of an e-commerce policy and a regulator to monitor the sector.

Also read: HUL says considering legal options against GST anti-profiteering authority order 

Also read: Expert panel formed to determine size of RBI reserves, Bimal Jalan named chairman