Kishore Biyani, the founder of India's biggest offline retail company Future Group, has hailed the government's decision to tighten the FDI norms for e-commerce companies. Biyani said it is now clear that the online marketplaces will have no option but to stick to just linking buyers and sellers on their platforms. Biyani, whose brick-and-mortar group is facing tough competition from e-retail giants like Walmart-backed Flipkart and Amazon India, said that the move could prove to be a game changer for offline retail companies.
The government on Wednesday issued new guidelines for online companies having foreign investments, thereby stopping them from selling products of companies in which they hold stakes. Biyani said that there is finally an opportunity for Indian retailers like Future Group to build India's very own Amazon or Alibaba, the Economic Times reported. "It's a game-changer for us. This is not really a policy but more of a clarification and every retailer will have to adhere to it. They can't build brands now," said Biyani told the daily.
Biyani thinks the new FDI norms has provided a lease of life for the offline retailers who can't always offer huge discounts on products like the well-funded online marketplaces who have a strong balance sheet. The new norms will also force many companies, including a lot of "online groceries", to shut shops, said the billionaire businessman.
In a notification, the commerce and industry ministry said: "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."
Besides, the commerce and industry ministry also prohibited e-commerce companies from entering into an agreement for the exclusive sale of products. All online companies will have to file a certificate along with a report of the statutory auditor to the RBI, confirming compliance of guidelines by September 30 of every year for the preceding fiscal. These changes will come into effect from February 1 this year. The decision comes in the backdrop of several complaints being flagged by domestic traders on heavy discounts being given by e-commerce players to consumers.
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