FDI tussle triggers debate on marketplace definition, Flipkart, Snapdeal oppose opening up India's ecommerce sector to 100% FDI

images (59)Ecommerce companies have pushed back against traditional brick-and-mortar retailers in the policy debate on who can be labelled a ‘marketplace’, the subtext of a larger contentious issue on foreign investment in online stores.

Retailers Association of India (RAI), a lobby organisation for companies such as Reliance Retail and Future Group, has demanded that the government clarify what constitutes a marketplace and sought status equivalent to their online rivals, as several large offline retailers, too, explore opening online fronts.

Many of these online stores that could make use of foreign capital are demanding opening up India’s ecommerce sector to 100% foreign direct investment (FDI). But larger online marketplaces such as Flipkart and Snapdeal, which are also part of the coalition, are opposing such a move before the government that is hearing various retail industry representatives before framing its policy.

Traditional retailers such as Shoppers Stop and BigBazaar, on the other hand, are putting up a united front with RAI. “A lot of our members are either already running or want to open online channels and get access to foreign capital. This ambiguity on ‘retail marketplaces’ creates a sense of risk,” said Kumar Rajagopalan, chief executive at the lobby group.

Companies such as Amazon, Flipkart and Snapdeal operate as marketplaces in India thus allowing any retailer or trader to sell goods on their platform. Companies such as Shoppers Stop, Tesco, Big Bazaar, Reliance Retail and others work only with their chosen vendors, which makes them closed marketplaces.

India’s ecommerce trade accounts for 2% of the overall retail sector, which grosses over 31.7 lakh crore ($500 billion) annually. The country’s online retail sector grew to $12 billion last year.

RAI moved Delhi High Court last week against the government on the FDI policy in ecommerce. Court directed the government to respond within four months.

Source – ETRetail.com

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