The Great Ecommerce Divide: Flipkart, Snapdeal Opposes FDI In Ecommerce; Amazon, Ebay Supports It!

Indian Government has started consultation with ecommerce portals, offline retailers and Internet activists regarding FDI (Foreign Direct Investment) in B2C segment of ecommerce. And it has opened up an interesting debate.

Ecommerce sector is divided on this issue and the differences have come out in the open again. Predictably, Indian ecommerce firms such as Flipkart and Snapdeal are vehemently opposing the proposal of FDI in eCommerce, while foreign ecommerce portals such as Amazon and Ebay are supporting the move. (We had reported earlier why Flipkart is opposing FDI)

Commerce and Industry Minister Nirmala Sitharaman started discussions on the issue after Government’s new and consolidated policy on FDI was released earlier this week; wherein 51% FDI in multi brand retail was allowed. 100% FDI in single brand retail is anyways allowed, along with 100% FDI in B2B ecommerce portals.

It’s the B2C ecommerce retail which is the bone of contention for domestic and international players and the decision by Govt. can have a major implication on this industry, where billions of dollars have been invested till now.

Some of the issues which were discussed in this meeting include:

• Taxation policies for online retail
• Definition of E-commerce
• A level playing field between ecommerce and offline retailers
• Inclusion of ecommerce within domestic trade policy of India

After the first round of meeting, Minister Sitharaman said, “We have heard everybody. I would need more meetings with everyone—individual operators or associations. It is for us to understand the broader context of e-commerce. We are not taking a position this way or that way.”

Offline Retailers Boycott Meeting

This high profile meeting was attended by powerful lobbies and groups concerned with the ecommerce and business in India such as Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI), National Association of Software and Services Companies & US-India Business Council. Major ecommerce portals such as eBay, Ikea, Flipkart, Snapdeal, H&M and Decathlon and Japan Plus were also present in the meeting to share their point of view.

However, India’s most powerful association of offline retailers: Retailers’ Association of India (RAI) boycotted the meeting, as they were not happy on the categorization of retail business into offline and online channels. RAI constitutes of members such as Reliance Retail, Future Group and more, and boycotting such an important meeting related with FDI shows that they are also against it.

What Participants Said

Snapdeal maintained their position that they are helping Small and Medium size Indian firms to establish their base online and cautioned that FDI in this sector can kill this niche industry. A Snapdeal spokesperson said, “The government must tread this issue with caution to ensure that there is no adverse impact on the growth of MSMEs in the country as result of any policy change in the long-term”

CII said that although they support 100% FDI in B2C Ecommerce, the local players should be given a ‘level playing’ field in order to compete against global retailers. They said, “E-commerce in India is at a relatively nascent stage and the market is yet to attain full maturity level.”

FICCI said that along with FDI, Govt. should ensure that global retailers are sourcing goods from Indian manufacturers, in a phased manner. This will help local SMEs and create a market which is balanced and fair. They said, “The idea is to emphasize that there has to be parity between online and offline retail policy with respect to FDI levels “

Amazon India said that they support FDI in B2C ecommerce, as this will help global companies to team up with local manufacturer; and support ‘Make in India’ vision in a huge way. A spokesperson from Amazon said, “We have always maintained that opening up this sector to FDI will be good for consumers and Indian businesses as it would allow us to partner with local manufacturers to source products not carried by other sellers on the marketplace, and support the Make in India vision”

Flipkart decided not to comment on the issue.

What is your take on it? Should Govt. allow 100% FDI in B2C Ecommerce niche? Do share your views by commenting right here!