E-COMMERCE DRAFT POLICY - WHY AMAZON, FLIPKART WORRIED.

BACKGROUND

E-Commerce OR Electronic Commerce means buying and selling of goods and services including digital products over digital and electronic networks like networked computers, television channels, mobiles or any other Internet based application.

 Recently  'Union Ministry of Commerce' has submitted the Draft National Policy on 'Electronic Commerce' which will now be studied by a 70-member think tank chaired by Suresh Prabhu.

 Suresh Prabhu - Union Commerce, Industry and Civil Aviation Minister.

 Currently This is only Draft, Not a final law.

 DIFFERENT MODELS OF E-COMMERCE - Mainly of two types:-

 Inventory Based Model : Example: Alibaba of China, In this model we directly purchase from E-commerce entity rather than sellers. i.e. inventory of goods and services is owned by the e-commerce entity and soled to the customers directly.

 Market-Based Model : Example: Flipkart(Walmart Now), Snapdeal, Amazon  ( In this model, a platform is provided to customers to interact with a selected number of sellers. Example, When an individual is purchasing a product from Flipkart, he will be actually buying it from a registered seller in Flipkart).

As you know, Earlier Government has approved 100% FDI in E-commerce  But There is a catch here. i.e. 100% FDI is only for Marketplace model, not for inventory based model.

This was done by  government intentionally to keeping in mind, that small sellers should not be impacted, because every company wants that they need to sell products based on inventory based model as all have potentials.


But companies are more smart - so what they did, they first setup their own company in India and start selling the products from that on e-commerce market.

  • And due to this, in 2016 , the government mandated that no platform should have more than 25% of its sales coming from a single seller.
  • Also, they are not allowed to directly or indirectly influences prices of products sold on their platform.
With these restrictions,e-commerce companies have not been able to offer their in-house brands extensively.

There are also a Flaw of Marketplace Model

There have been incidents of customers expressing dissatisfaction with products purchased online. Like
In some cases, bricks and soaps have been delivered instead of mobile phones.

 And in these cases company like Amazon, Flipkart can't do anything as they don't have full control - they are act as a facilitator and provide online platform to sellers.

 That's why these companies wants 'Inventory Based Model' In India.
WHAT ARE KEY POINTS IN E-COMMERCE DRAFT CREATED

  • FDI may be allowed in inventory based e-commerce companies up to 49% (i.e. 51% ownership of Indian company)
  • If company need 100% inventory based models - Then e-tailer sells 100% Made-In India products.
  • The market place will not be able to offer deep discounts through their in-house companies listed as sellers. (like In Amazon - there are some companies who sells products as a seller (but these are a part of Amazon Itself, not any external seller - so they generally give high discounts due to this other small sellers get impacted)
  • Task force suggested a Central Consumer Protection Authority (CCPA) - to provide a forum for  consumer.
  • Data Localization Measures : Companies such as Amazon, Flipkart that generate users data through e-commerce have to store data exclusively in India ( Earlier They store data (It could be debit card details, credit card , email, address details anything store outside India)  - Now as per draft atleast a copy of that data should be stored in India.
Due to this AMAZON, FLIPKART WORRIED

WHAT ARE THE BENEFITS OF THIS E_COMMERCE DRAFT

  • Benefit to small sellers
  • Boost in Make in India.

For a common consumer/Buyer - earlier they got high discounts. Now may be they did not get high discounts. That's why criticism is also there of this e-commerce draft. Hence some people called this Anti-consumer.
Image result for e-commerce draft policy 


 Amazon, Flipkart may reach US government and US government may intervene in this to change something so that they can buy profit.
For more info, you can access below links:

 https://economictimes.indiatimes.com/news/et-explains/ecommerce-draft-policy-whats-in-the-cart/articleshow/65251752.cms

 https://economictimes.indiatimes.com/industry/services/retail/amazon-walmart-may-seek-us-help-on-ecommerce-policy/articleshow/65221086.cms

Above Information is as per as per data available in news till the date when I am posting this.

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