New DIPP Guidelines in Favor of e-Commerce Marketplace

BENGALURU: No more lucrative discounts!! says, the new guidelines issued by the Department of Industrial Policy and Promotion (DIPP) on Foreign Direct Investment (FDI) in terms of Marketplace e-Commerce retailing. India’s Commerce Ministry asserts that an online marketplace is granted with 100 percent FDI, attracting more foreign investments in the fast growing e-commerce segment of India.   

Aamir Jariwala, Secretary, e-Commerce Coalition of India comments "It appears that with the consent and association of the owner of the inventory, the e-retailers may yet be able to provide additional promotional discounts."

To bring clarity, the DIPP defined e-commerce based ‘Inventory model’ and ‘Marketplace model’. It defines Inventory model as an e-commerce where inventory of goods and services are owned by the entity and sold to the customers directly. Whereas, the Marketplace model is defined as an entity acting as a facilitator between buyer and seller, providing IT platform on digital and electronic network.

 To bring a balance between e-retailers and brick-and-mortar retailers, the guidelines states that Marketplace models will not directly or indirectly influence the sale price of goods and services and shall maintain level playing field. A DIPP official highlighted that discounts can only be given by the owner of the goods or provider of services.  "E-commerce guideline allows owner of inventory i.e. sellers registered on marketplace to determine price by giving discount," explains Atul Chaturvedi, Joint Secretary, Department of Industrial Policy and Promotion (DIPP).  According to the norms, e-Commerce firms are restricted to sell upto 25 percent of the total sales from a single vendor.

The Ministry added that the foreign investment in Inventory-based e-commerce companies, where goods sold are owned by the online retailer would still not be allowed. To the new DIPP’s guidelines, Marketplace e-commerce firm Snapdeal says, “These guidelines recognize the transformative role that e-commerce marketplaces will play in the Indian market. It is a comprehensive announcement which will pave the way for accelerated growth of the sector in India.” The purpose for formulating and building guidelines is to provide transparency in the existing policy for FDI on e-Commerce sector concludes DIPP.

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