“Minimum government, maximum governance”
That slogan somehow today rings hollow. Yes, it does create a level playing field but somehow, the way in which the wind is blowing, online retailing is where the future is; we simply cannot fight it.
Take a look at the new rules which come into effect from 1st Feb, 2019.
- All online players, be it Flipkart or Amazon, cannot sell products of companies in which they hold stake.
- Govt has banned exclusive marketing arrangements that could influence product prices
- Online retailers have to offer equal services or facilities to all their vendors without discrimination.
- It has mandated vendors to sell only 25% of their products through an e-commerce platform.
- Companies will have to file a certificate along with a report of statutory auditor to the RBI, confirming compliance of guidelines by September 30th of every year for the preceding fiscal.
- Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory.
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. This revision in norms was apparently at the behest of small vendors who had complained about the predatory pricing policies and deep discounts being offered by the online retailers.
So what does this mean – will the deep discounts from online retailers come to an end? And does it mean that the life of small and medium players of the trade will now suddenly change from 1st Feb 2019?
Maybe the offline stores got irked because the online retailers were giving deep discounts at increasing frequency and they simply could not keep up. Maybe these restrictions will end frequency of these deep discounts but not the once-in-a-while deep discounts, which have become their hallmark.
Surprisingly, the Competition Commission of India, replying to the complaint filed by the All India Online Vendors Association (AIOVA), which is a group of over 2,000 sellers on various e-commerce market places, ruled that business practices of Flipkart and Amazon are not in violation of competition norms and rejected allegations of abuse of market dominance. CCI also ruled that any intervention in e-commerce marketplace needs to be crafted carefully to ensure it does not kill innovation. So when the CCI did not find this wrong, how come the Govt intervened? A simple question comes to mind – when the street corner garment or shoe vendor offers a 70% off, does anyone restrict them from offering that discount? Isn’t it the market demand and supply which decides how much discount? Will the Govt decide how much discount too? And by the way, what exactly is the definition of “deep discounting?”
Yes, barring online retailers like Flipkart or Amazon from selling products of companies in which they hold stake was the need of the hour as they were circumventing a loophole in the FDI law. So this is something they should have expected to happen and should not affect them much.
Those in the industry say that deep discounts will continue but maybe in more creative ways and its frequency might come down.
This Diwali and the Great Indian sale is gone…let’s see what happens next year!
PS: Cannot help but wonder how comes Jio was not pulled up for disrupting the entire telecom sector, with its “predatory pricing?”