New FDI rules introduced to bring about a balance in online and physical sales

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The government introduced new Foreign Direct Investment (FDI) rules aimed at filling the gap between e-commerce sales and physical retail sales. Due to increased phone usage and internet penetration, online shopping platforms had become highly popular, bringing down sales for entities with only physical stores and no online reach. Therefore, the government stepped in to create a more favourable environment for online as well as offline sellers. 

E-commerce
The new FDI policy is expected to have a major impact on the e-commerce market.

As per the new policy, manufacturers cannot sell products exclusively on online portals. This means, companies will have to release the products through online and offline media and cannot get exclusive selling rights for a certain website. This would increase the number of options for prospective customers. 

The government also prevents online e-commerce majors such as Flipkart and Amazon from stocking up products up to 25% of their total stock from a single vendor. Additionally, online platforms that have foreign investments cannot sell products from retailing companies in which they hold equity stake. As a consequence of these new rules, online shopping websites will include more retailers and offer products directly through the third party-sellers. This may affect the price of products as the third-party seller will quote the price and include charges such as delivery charges, which were usually waived by websites in order to increase sales. 

Considering the fact that the deep discounts offered by online entities disrupt the marketplace harmony, the government barred online platforms from offering deep discounts. This will have a major impact on those who are regular online shoppers who preferred the online medium due to the low pricing. 

The new FDI policy, that came into effect on February 1, is said to hamper the businesses of e-commerce giants but is likely to increase the sales and number of physical stores in the country. 

Source: India Today

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