The Department of Industrial Policy & Promotion new rules on the foreign direct investment (FDI) policy for e-retail has benefitted the offline retailers also known as brick and mortar (B&M) retail sector.
Brick and mortar(B&M) refers to businesses that are bound to a physical space,like a specific building that customers go to in order to buy products.After new rules,offline retailers did not faced any pressure whereas most e-commerce portals were forced to take down thousands of products from their portals to meet new government regulations.
Recently,DIPP had issued a clarification to the existing rules pertaining to Foreign Direct Investment in e-commerce companies.The new rules were (a)If an entity is owned by an e-commerce marketplace(ECM),it cannot sell its products on the platform run by the same ECM (b)A single vendor can’t account for more than 25% of sales in an ECM or platform and (c)The rules puts curbs on exclusive partnerships with brands or providing favorable services to a few vendors.
In 2016,the government permitted 100% FDI in the marketplace model of e-commerce,but not in the inventory-based model.In a marketplace model, ECMs act as platform for vendors to sell their products.In the inventory-based model,ECMs own and sell products.
The new rules of the DIPP policy was directed at protecting small vendors on e-commerce websites.It seeks to ensure small players selling on the portals are not discriminated against in favour of vendors in which e-commerce companies have a stake.It will also ensure a level playing field for all vendors looking to sell on the e-commerce portals.