Revised e-comm rules may hit online sellers, shoppers

With the government’s decision not to extend the February 1 deadline to comply with the revised norms relating to FDI in e-commerce, online shoppers will have to contend with reduced selection, higher prices and disrupted customer experience while sellers will be unable to source wholesale merchandise at scale as e-commerce giants Flipkart and Amazon grapple with compliance.

Sources in both Flipkart and Amazon.in said that they expected the government to postpone the deadline as they needed more time to restructure their entire operations. “There are products which are either in the fulfilment centres or are on the way to the customers’ place. So, there is bound to be some amount of non-adherance [with the new norms],” sources said. “As of now, there will be no changes made to the way the business is carried out,” they added.

But a vendors’ association said these e-commerce giants had enough time to start making changes to their businesses instead of waiting till the deadline.

“There are bound to be many slip-ups and non-compliance issues on the part of e-commerce marketplaces as they will not be able to re-orchestrate their operations with partners and vendors in such a short turnaround time. As a result, they could suffer interim losses of 25-30 per cent at the minimum. Above all, its a spirit dampener for global investors who will be chary of investing in India,” observed Sanchit Vir Gogia, Chief Analyst, Greyhound Research.

Both analysts and industry experts that BusinessLine spoke to feel it is a very unfair move on the part of the government, which on the one hand is going all out to encourage foreign direct investment, but on the other has pulled the rug from under their feet with a very short compliance deadline.

Fewer choices

Online shoppers can expect a curtailed range, which could be smaller by as much as 60 per cent and much higher prices (as sellers will not be able to pass on the benefits of wholesale sourcing from companies in which e-commerce players have invested). Moreover, delayed deliveries as a result of fewer vendors for the same product can impact customer experience significantly, pointed out K Vaitheeswaran, co-founder of India’s first e-commerce company Fabmart.

While all this will bring in greater parity between online and offline retailers, small and medium sellers on e-commerce marketplaces will suffer as they will not be able to continue with large-scale sourcing from subsidiary wholesale arms of e-commerce players. For instance, a significant number of small and medium sellers on Amazon.in, which has over 4 lakh sellers, and on Flipkart, which has over one lakh sellers, will be unable to compete with larger sellers, on price.

However, all is not lost yet for e-commerce marketplaces as online shoppers in Tier-1 cities have evolved beyond shopping for mere discounts and are increasingly shopping online for convenience.

Editorial: Stifling e-commerce