The Ministry of Commerce & Industry clarified yesterday through a press note that it would allow 100% FDI under the automatic route in marketplace model of ecommerce but would continue to disallow FDI in the inventory based model. Amongst the key points mentioned were – 1. such e-commerce marketplaces would be allowed to provide support services to sellers on their platform such as warehousing, logistics, order fulfillment, call center and payment collection. 2 – Not more than 25% of the sales through these marketplaces can be from one vendor or their group companies.
e-commerce entities providing the marketplace will not directly or indirectly influence the sale price of goods or services sold through the platform. We believe this is a positive step by the government in providing clarity on its stance on FDI in e-commerce in India. We understand that Snapdeal and Shopclues are pure marketplaces which should be compliant with these rules; on the other hand Amazon and Flipkart have Cloud tail (JV between Amazon and Catamaran Ventures) and WS Retail respectively accounting for a significant proportion of sales and may need to make some changes to be compliant. A single vendor or group companies of the e-commerce entity cannot account for more than 25% of sales on the platform.
Close to US$1.2bn has been raised by internet/e-commerce companies from private markets so far in 1QCY16, suggesting fund flow into the sector overall has remained reasonably resilient despite stress in select segments and reports of possible down rounds in some of the larger companies. Five companies viz. Ibibo group (goibibo, redbus), Snapdeal, Bigbasket, CarTrade and ShopClues raised rounds of over US$100mn during the quarter.
Finally, to help offline & Mall of India Retailers, E-commerce entities will maintain level-playing field by not influencing the sale price of goods and services. Thus, they cannot offer discounts. The policy seems to be supportive of in-house logistics arms viz. eKart (of Flipkart) and Amazon Transportation Services.