Shake up of Indian eCommerce sector paves the way for more eCommerce entrants

Mar 31, 2016

After years of uncertainty India has given its official blessing to the foreign investment that its eCommerce sector has attracted. This follows years of disputes over whether foreign-owned online shopping sites were legal. Independently owned family stores, which dominate India’s bricks and mortar retail, have complained that eCommerce companies were violating New Delhi’s strict ban on foreign ownership of supermarkets, department stores and multi-brand retail outlets. This is one reason why many of the world’s global retail giants have not had any sort of independent footprint in the country.

New Delhi has now laid the ground rules for the sector allowing up to 100 per cent foreign ownership in eCommerce groups. This is likely to motivate those who have already made an investment in the country to up their stake holdings. Those that already have stake holdings in the country include eBay, who was an early Snapdeal investor, Alibaba who has stakes in Snapdeal and Paytm and Amazon who has its own India based entity. Walmart has also been long keen on India. However, there are caveats. It has said that these companies must follow a marketplace model providing technological platforms that facilitate trade between buyers and sellers rather than an inventory based model in which companies own and sell goods. The announcement also specified that no single vendor, or group of vendors, on a foreign owned eCommerce platform should account for more than 25 per cent of the products sold through that site. It also prohibited eCommerce companies from setting prices or offering discounts.

So what does this mean? India has attracted close to $10bn worth of investment which means those that have invested in the sector can breathe a sigh of relief. In reality the government had very little choice but to bless the situation but this announcement paves the way for other eCommerce players to finalise their launch plans into India. With the market forecast to rise to $100bn by 2020 it might not be a bad thing to start thinking about!

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