E-COMM - CREATING A NEW MESS

about 3 months ago
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E-commerce, which has never had it so good, for whom the pandemic has almost been like a blessing from the heaven’s is currently a worried lot.

The Ministry of Consumer Affairs on Monday bought forth a slew of rules, sounding almost like a diktat from the license raj. With brick-and-mortar companies struggling for survival while e-commerce sites made merry, the ministry, trying to be look like the benevolent savior, is actually proposing banning flash sales on e-commerce platforms. These flash sales are the best time for Amazon, Flipkart as they see the biggest spikes in customer orders as brands offer heavy discounts on their products.

The Ministry has alleged that these sites, on account of their ‘back-to-back’ or ‘flash sales’ are limiting consumer choice. The complaint is that one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a ‘flash or back-to-back’ order with another seller controlled by platform. This prevents a level playing field and ultimately limits customer choice and increases prices.

And for this, it has proposed new draft rules under which, such flash sales are banned. Well, later Monday night, the Govt issued a clarification saying that “conventional” flash sales were not banned. What does that mean? What is the definition of “conventional?” A company, say a garment designer wants to clear stock and holds a sale on say, Amazon; will that count as “conventional” or what?

Apart from this confusion over “flash sales” the other one is even more confusing? It has also mooted that  e-commerce sites should ensure that none of their "related parties and associated enterprises" are listed as sellers on their shopping websites, and no related entity should sell goods to an online seller operating on the same platform.

This rule could impact Amazon which has its own brands, as it holds an indirect stake in two of the top sellers on its website, but says it does not give any preferential treatment.

Well, a few years ago, to give a level playing field, the Govt had forced e-commerce companies to bring down their stake in “preferred sellers” directly or indirectly to not more than 24%. This rule was followed and came from the gavel of the Commerce Ministry. But now a diktat from the Ministry of Consumer Affairs? So, does this mean that e-commerce will now have this additional ministry issuing rules, along with commerce and industry ministry? What happens to what the commerce ministry said and did earlier?

Does this now mean that an e-commerce platform can have no shareholding in any company selling goods, directly or indirectly? The proposal, which is applicable to both Indian and foreign players- means that even the likes of Reliance and Tata’s, which have so many of their own brands, directly or indirectly will be impacted.

If the Consumer Affairs Ministry wants no relation whatsoever between e-comm companies and sellers, the entire diktat will prove to be disruptive and will require huge restructuring.

There is another new rule proposed which has the e-comm companies in a complete knot – the introduction of concept of “fall-back liability.” Under this, the e-comm site will be held responsible if a seller on their platform fails to deliver goods or services due to negligent conduct, which causes loss to the customer. The e-comm companies are upset over this rule as they are just a marketplace with no real relationship with any seller – how can you hold the market responsible when the shoes you bought from say, Bata, gave you a shoe-bite.

The rule also proposes that companies will have to provide domestic alternatives to imported goods, adding to the government’s push for made-in-India products. Really?

These rules and many more are akin to micromanaging these e-comm companies. It will kill the sector and like the telecom, will get concentrated in the hands of just a few. And if these rules are for the benefit of the consumer – well, this micromanaging is detrimental.

Even the brick-and-mortar companies need to wake up and smell the coffee – this new dynamic and huge market place is here to stay; the Govt needs to make them more capable instead of killing those who are doing well.

Looks like life in India now has strings attached in every aspect…

The bottomline - retailers will have to change their strategy; how long they can survive with government protection?
 

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