Tripti Narain says, “In a major reform, the government has cleared 100 per cent Foreign Direct Investment (FDI) in online retail consumer businesses that operate as marketplaces, Department of Industrial Policy and Promotion (DIPP) said in a notice on March 29. Marketplace model means that the companies act as a facilitator between buyers and sellers by providing a technology platform.

As per the guidelines issued by DIPP on FDI in e-commerce, FDI has not been allowed in inventory-based model of e-commerce, where the company owns the goods that are being sold through its platform.

To bring clarity, the DIPP has also come out with the definition of ‘e-commerce’, ‘inventory-based model’ and ‘marketplace model’.

The catch here is that most of the large e-commerce players in India operate as marketplaces. But these kinds of companies will not be permitted to have more than 25 per cent of their sales come from one vendor, even if that vendor is the company itself. This has left big players such as Amazon and Flipkart in a limbo, who have merchants (WS Retail for Flipkart, Cloudtail for Amazon) which account for a substantial chunk of sales”.

Big Billion Days to End for Flipkart and Amazon? Online Retail Giants Mum Over FDI in Ecommerce

‘Econsultancy’ Blog

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