As the government clarified that foreign direct investment (FDI) is not allowed in inventory-based eCommerce, Future Group CEO Kishore Biyani pointed out to one of the country's leading online grocers, Bigbasket, stating its operation as illegal. Biyani, a well known figure in the traditional retailing industry, said that under the new guidelines Bigbasket should ideally be shut immediately.
Biyani while talking to a leading media house stated that Bigbasket's inventory-led model has become totally illegal as per latest government notifications. He emphasised that Bigbasket doesn’t have any seller and directly sell to the consumers. Biyani's outburst would also turn the heat on other startups like online lingerie firm Zivame and fashion retailers Jabong and Myntra, all of which have a significant inventory-led business.
Bigbasket mostly operates an inventory-led model and garners about 33% of total sales from its private brands. Hari Menon, CEO and co-founder, Bigbasket, said that they are looking at their legal position. The view is that there is no cause for concern. The e-grocer has raised $210 million so far, mostly from foreign investors. Bigbasket directly competes with Biyani's Big Bazaar stores.
Mohan Kumar, partner at Norwest Venture Partners, said that even the mentioned guidelines would not be considered as final and there will be more revisions. The guidelines were not meant to be a punitive measure, but to bring more clarity. The government is not going to enforce the guidelines from tomorrow.
It is not just the inventory-based eCommerce players who will struggle with the new regulations. Online fashion retailers Myntra and Jabong will also have to display the names of the sellers prominently alongside products. The DIPP guidelines stipulate that the market places should display the name and address of the sellers on the website apart from shifting the onus of customer satisfaction onto the seller, rather than the platform.
Though German internet firm Rocket Internet-backed Jabong follows a mixed model of inventory and marketplace, it is increasingly moving towards a marketplace model.