100 per cent FDI came out as a bolt from the blue for the eCommerce industry and since then the online retailers are trying their best to point-out the loops holes in this new circular. Not just online retailers but, the FDI policy has also prohibited small scale- retailers who rely upon eCommerce websites to reach to a larger consumer base. The notification, as it restricts eCommerce firms to influence prices on the products, has jolted various debates that are yet to see some conclusion.
Now, it makes me more furious when I think about the counter-step from these eCommerce players. Discounting to eCommerce is like oxygen to humans and thus, legal advisors for these online firms will have to pull up their socks and look for a way out, keeping the discounting alive and at the same time not coming under the scanner.
The big question here is, HOW? Looking at the current eCommerce mechanism, it is clear that the companies have already burnt huge cash and are under constant pressure from their investors to soak up the losses and start making profit. End of discounting, if it happens, will surely be a big barrier to eCommerce growth in the country and thus these online masterminds will never let that happen.
Here are some loopholes in the recently rolled-out FDI notification that online players might leverage upon:
Masking discounts as cash-backs
Say thanks to the online payment solution providers like Paytm & FreeCharge for introducing yet another lethal eCommerce weapon named ‘cash-backs’. Cash-backs are largely a loyalty programme offered by several banks, financial institutions etc. As discounts are equivalent to cash-backs, now a customer might shop for a product online at its original MRP and get 50 per cent of it as a cash-back, as simple as that!
This might also result in launch of a Flipkart or a Snapdeal wallet (thinking out loud here!)
Providing discounts to merchants, not consumers!
Speaking to Retailer Media, one of the senior industry experts, on the condition of anonymity, said that online retailers aim at boosting small traders by giving them discount and not to the customers. This is indeed a valid point as the recent FDI policy does not question the marketing expenses these online firms make in order to help merchants selling their products online. Surely, this is one of the biggest loopholes that cannot be challenged in a court of law.
Storing inventories on behalf of sellers
The 100 per cent FDI norm will come into the picture only if an online firm operates as a marketplace model (as an online mall) that connects retailer and SMEs to consumers through a technology led platform. Now, don’t you wonder why Amazon has not come under the FDI radar? Interestingly, the company has managed to own parts of the process, by the name ‘Fulfilled by Amazon’ services for some selected retailers, where it stores inventory in its own warehouses for the sellers. And there you go… As per the circular: “E-commerce marketplaces may provide support services to sellers in respect of warehousing, logistics, fulfillment, order fulfillment, call centre, payment collection, and other services.”
Despite these major dodge in the policy, eCommerce industry is on its toes and will not leave any stones unturned until they find a permanent fix for the same. My question is: If one can store inventory on behalf of their traders and merchants and FDI is permissible for it, then isn’t this injustice to marketplace industry just because they ‘own’ the inventory?