Indian eCommerce shake-up: new norms and a level playing field!

India’s retail download has been in shambles this quarter. Behind the scenes, there were loads of protest and petitions by the domestic retailers (both online and offline) and small traders confederation to the Government of India against the major eCommerce players dominating the retail trade in India with predatory pricing, deep discounting (and cashback) and loss funding.

Government of India decided to step in and this Wednesday introduced some changes in the FDI in e-Commerce norms that impacts all foreign investor-backed etailers like Flipkart (Walmart) and Amazon and provides a breather to the domestic retailers in an aim to create level playing field and fair market competition. The revised norms kick in on 1st Feb 2019.

Here is a short summary of the changes:

1. Online marketplaces can’t sign exclusive deals for products. This means - no more exclusive and online only launches - like that by Xiaomi, Huawei and many other smartphone manufacturers.

2. Single vendor can sell a maximum of 25% of its inventory on an e-commerce platform (e-commerce sales have outpaced brick and mortar stores - driven by deep discounts and lucrative cash back offers)

3. Online retailers are barred from selling products of companies in which they own stakes. So brands having direct backing of Flipkart or Amazon will not get any special discounts and offers on their portal as that may be considered discriminatory as well.

4. Priority shipping and faster deliveries, like that by Amazon Prime, may be deemed unfair and discriminatory.

5. If the online marketplaces also have a logistics company (like Amazon or Flipkart), then they can’t operate for free of charge. So no more free deliveries.

While all e-commerce companies and vendors will now have to go back to the drawing board and see if their business models comply with the new requirements that are going to be effective in a months’ time, market dynamics is also slated to change!

As per research, almost 2/3 of all online customers are bargain hunters and they have been adequately pampered by new entrants and eCommerce giants in an attempt to capture a large market share in a relatively short time span by offering huge discounts, cashback and freebies. With these discounts and offers drying up, online customer's purchasing habits may also change accordingly.

It also skews the balance in favour of companies with strong offline presence in their everlasting battle to capture market share. Samsung may now have an upper hand vis-a-vis Xiaomi which needs to scale up its brick and mortar stores very fast to compete and retain its #1 position in smartphone sales. With evolving market dynamics and regulations in a booming $18 billion eCommerce market, it would be interesting to see what new strategies companies come up with. Sounds like an exciting 2019.