Scale Down on Amazon, Flipkart Big Discounts

Introduction to e-commerce

Foreign Direct Investment norms in India have been amended for E- Commerce and these amendments can hamper the revenue of actual players of online industry Amazon and Flip kart. On Dec 26 Modi government declared certain changes in FDI norms for E – Commerce which strives for providing a shield to offline retailers and these changes will come to effect from Feb 1. These restrictive changes are likely to a show long-lasting impact on the online firms; buyers will also be deprived of countless fascinating deals.

Revised norms in FDI policy for E -Commerce

This move of the government is a response to the complaint by group of online sellers alleging Amazon and Flip Kart selling their private labels products on deep discounts to wipe out small rivals to the Competition Commission of India. They claimed that these online platforms provide branded products deals at rock bottom prices. Confederation of All India Traders impulse the Commerce and Industry Ministry to make E -Commerce free from the malpractices and the evils of manipulating the prices and offering deep discounts so as to provide all dealers fair chance to play in fair competition and refrain from extending time of implementation of changes of FDI norms which wasn’t amenable by Amazon and Wal-Mart owned Flip Kart, however, domestic firms like ShopClues and Snapdeal had favored them. The government has also faced objection from the American Chamber of Commerce in India, The Internet and Mobile Association of India and from the US – Strategic Partnership Forum.

As per the reports of The Economic Times companies had appealed the government for postponement of time limit by at least 6 months to comply with the amended norms as they find it difficult to do in the specified time limit. The new policy for E -commerce restricts them from offering deals with big discounts and procuring more than 25% of inventory from a single vendor. It also restrains online entities from selling products that are offered by the retailers in which companies have equity participation.

Possible consequences of revised norms

Without any fuss let’s decode how the customers will be affected by these changed norms. Since the online entities now have to accommodate inventory from dealers where they have no participation in equity, this will reduce the discount percentage. Earlier these companies used to acquire bulk products from manufacturers at huge discounts and sell them to the companies where they have an equity stake and these products are again sold on online platforms at deep discounts which these have to restructure now.

Products that were exclusively available on certain online platforms will now be accessible from all market places. The outcome will be increasing in the number of retail stores dealing offering a fair deal to customers. We can also expect a shift from these online stores to physical stores and change in the pattern of online shopping as product prices will be comparatively higher than the previous offers due to the limited discount offer.


E – Retailers will endure being in a stable position considering the Digital India campaign and growing internet penetration however the modified rules in FDI policy will uplift the market of offline dealers as well. It will increase their revenues and will give them a fair chance in the competition if they enter online dealing along with the offline business.

Rajat Mehrotra

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