RAI Wants Ecomm in Pvt Brands
Over the past year, RAI had sought to draw the government’s attention to the lack of clarity on the marketplace model used by ecommerce companies, saying this was a disguise for multi-brand, business-to-consumer (B2C) retail, which companies with overseas holdings are barred from under the country’s foreign direct investment (FDI) policy. Ecommerce companies say they are platforms that connect buyers with sellers. RAI had petitioned the government to give clear policy directions on FDI in ecommerce with the aim of safeguarding the interests of retailers and brands. The grouping had approached the Delhi High Court last year after failing to get a response from the government in its quest for parity in FDI norms with ecommerce players, which have attracted billions of dollars in overseas funding using the marketplace model.
The association will argue in its letter that since inventory-based ecommerce is explicitly prohibited under the rules, those selling groceries and private brands operating on that model should be asked to immediately cease operations. “While the notification said marketplace cannot influence sale price, most online retailers have private brands and can control their pricing or give huge discounts. This should not be allowed,” said one of those cited above.
The rules also stipulate that an ecommerce marketplace can’t have one vendor or group unit accounting for more than 25% of total sales on the platform. This could have an impact on Amazon India as its marketplace is dominated by Cloudtail, part-owned by the company.
RAI’s letter will also raise the matter of advertising campaigns by online players offering guarantees. “The promises they offer today are untenable (under) the new policy,” said an executive. Marketplaces have to mention names, addresses and contact details of sellers in all communications, making for transparency.