You might have to say goodbye to 50% discount on clothes on your wishlist or to that iPhone you were planning to buy this Holi. You also need not wait for the ‘Big Billion Sale’ anymore.
This is because, from today, 1st February 2019, e-commerce platforms will not be able to sell products of those companies in which they own equity. They will also not be able to have exclusive marketing arrangements with sellers so as to influence the price of a product.
This means that let’s say if Flipkart invested in a company ‘X’, it will not be allowed to sell the product of this company ‘X’ on Flipkart as it would give X competitive advantage.
Also, let’s assume Flipkart had an agreement with Xiaomi to sell its smartphone when it would launch its phone ‘Y’. Now it would no longer be able to do this kind of exclusive launch anymore.
As for the special marketing arrangement, it refers to Amazon Prime and Flipkart Assured that give its users special access and treatment.
It is estimated that this arrangement can wipe out almost 4 lakh products from Amazon India and Flipkart could lose nearly 25% of its sales revenue!
E-commerce platforms are supposed to act as a market to connect buyers and merchants, not as inventories. For this reason, e-commerce companies cannot hold inventories anymore. 100% FDI (Foreign Direct Investment) is allowed in the market model.
However, inventories are allowed with 100% Indian made goods, an attempt to boost Make In India.
Investment analysts believe that “not the regulation but its erratic implementation will discourage future investment in the industry”.
It will also hamper India’s image as an FDI (Foreign Direct Investment) destination especially because it was just last year when Wallmart invested billions of dollars in Flipkart.
Also Read: Will Online Shopping Become Costlier Or Cheaper With Flipkart Getting Bought Over By Walmart/Amazon?
Why did the Government take such a drastic step?
E-commerce platform, with their deep pockets and deeper discounts, were hurting brick-and-mortar retail, so to create a level playing field, the government went for these regulations.
But industry watchers believe that it is an act by the ruling regime to appease millions of small traders that form a considerable vote bank. They were hard hit by demonetization and GST rollout and have long complained of the undue advantage that the e-commerce big boys enjoy.
It also aims to benefit smaller e-commerce players who cannot compete with e-commerce players.
There’s also speculation that the government did this for Reliance Industries Limited (RIL) owned by Mukesh Ambani, as Reliance Retail and Reliance Jio, together will launch a new e-commerce portal soon.
Whatever may be the reason, the government must not take such knee jerk policy decisions as it affects millions of people on both sides of the market.
We users had become used to the pampering done by e-commerce sites in the form of huge discounts and fast delivery, both of which might no longer be available anymore. This makes me wonder if online shopping will lose its charm in its post-discount phase.
Image Credits: Google Images
Source: Knapilly, Indian Express, Bloomberg
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