Whether Flipkart becomes the e-commerce leader or Amazon, the festival season has for sure increased the friction between the physical retailers and e-marketplaces.
As the festival season online sales continue unabated, the physical retailers are asking one questions: Is the government serious about taking action against marketplaces that go beyond the brief of staying marketplaces in India?
E-commerce has been defined as buying and selling of goods and services, including digital products over digital and electronic network. When the Narendra Modi government allowed for 100 percent FDI in retail, it was only for the marketplace format of e-commerce where the company provides a platform as a facilitator between buyers and sellers and not for the inventory-led model.
Despite flouting the rules in the past with front page advertisements in newspapers screaming discounts and sales and the billion dollar sales (the FDI rules stipulate that online retailers are not allowed to impact the market price of any goods), except for vendors and retailers associations crying hoarse about how rules have been flouted and circumvented, everything seems to go on as normal for marketplaces. In fact, according to a report in The Economic Times, Amazon has gone one step further by getting Amazon Export Sales LLC to sell products through its ecommerce portal in India.
Amazon global store has an advantage in that it allows users to buy products that are not available in India and are available on Amazon in other countries.
Vendors and retail associations blame the government for not being proactive to their interests and protecting them. “The government is on the right forums, be it Brics, WTO, etc, but they don’t have time to hear our grievances and address them,” says a spokesperson of All India Online Vendors Association (AIOVA). The spokesperson said about how they were trying to ‘educate’ the government about the nascent online retail industry in India but were unable to get appointments with any ministry. “Each minister or department tell us to talk to another with no one having the time to hear our grievances,” said the spokesperson.
When a committee for retail was set up by Amitabh Kant, the AIOVA allege they were not called. But Amazon and Flipkart are represented, the spokesperson alleged. “What are Sachin Bansal and Amazon doing on the committee?” he asks. “Even Commerce Minister Sitharaman is not answering the question,” says the spokesperson.
— Nirmala Sitharaman (@nsitharaman) October 17, 2016
That was the reply of Commerce Minister Nirmala Sitharaman to a tweet addressed to her regarding Amazon listing its US arm, Amazon Export Sales as seller on its platform enabling it to sell products.
There are some associations like the Retailers Association of India which represents retail, be it online or offline. It has around 500,000 stores and 1,000 members in the association. “We have been noticing what the marketplaces are doing and hope to appraise the government of what is going on in the garb of a marketplace,” said Kumar Rajagopalan, CEO, Retailers Association of India (RAI).
Some of the members of the RAI are selling online through the marketplaces. “It is good for fashion, particularly, where clearance sale is conducted online. No one is selling current fashion on the marketplace,” says Rajagopalan. He says that except for Apple phones, almost everything else sold online is available at the same price offline or sometimes even cheaper offline. Amazon listing Amazon Export Sales on its India website as a seller is a clear violation of FDI rules, says Rajagopalan.
However, Sanchit Vir Gogia, Chief Analyst & CEO of Greyhound Research, says that no rule is being flouted but instead a ’roundabout’ manner is being taken. “There are no rules stating that foreign marketplaces cannot sell through an Indian marketplace. So what is the issue,” he asks.
However, RAI’s Rajagopalan even doubts the sales claims made by the online marketplaces. While Bengaluru-headquartered Flipkart claims it has sold 15.5 million units in the five days online spectacle, Amazon says it sold 15 million units for the same period. “Since sales tax would have been paid, why is it that no state is claiming to have increased sales tax collection on account of the sale,” asks Rajagopalan.
On its part, Amazon India’s spokesperson told the Economic Times, “The Global Store type of functionality simply allows a listing service in India for foreign sellers though the underlying transaction is no different.” That does not seem convincing to the online and offline retailers and vendors.
The Confederation of All India Traders (CAIT), a trader’s body plans to engage with the government and lodge a formal complaint against the marketplaces.
“Where is the level playing field the government has been promising all retailers,” asks Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT).
The discount wars have led to a battle among retailers and retail associations that shows no sign of abating or even to a redressal of the issues.