Govt looks to cheer SMEs with tweaks to e-commerce norms


December 29, 2018

Written By Debojyoti Ghosh

In a bid to bury the ghosts of demonetisation and rollout of the goods and services tax (GST), both of which impacted small and medium enterprises (SMEs), the Narendra Modi-led NDA government is trying to woo back its core vote base with a promise to tweak foreign direct investment (FDI) norms in e-commerce in India, one of the fastest growing online retail markets in the world which is about $41 billion in size.

The government’s revised norms for FDI in the e-commerce sector, which was announced earlier this week by the Department of Industrial Policy and Promotion (DIPP), could make things difficult for foreign-owned online players such as Amazon India and Flipkart, which is now owned by the $125-billion U.S. retailer Walmart.

On December 26, the DIPP banned e-commerce companies from selling products from entities in which they have an equity stake, and restricted online marketplaces [such as Amazon India, Flipkart and others] from mandating any seller to sell any product exclusively on its platform. It also mandated that a single seller cannot have more than 25% of sales on one online marketplace. It also instructed that cash-back policies provided by online retailers to customers should be “fair and non-discriminatory”. The revised norms will be effective from February 1, 2019.

Today the online marketplace in India is dominated by Flipkart and Amazon. Experts say the revised FDI norms might impact Amazon the most due to its investment in Cloudtail and Appario, which contribute a major chunk of its sales. Cloudtail is a joint venture between Amazon and Catamaran Ventures, a fund founded by N.R. Narayana Murthy; Appario is a joint venture between the Patni Group and Amazon. The government’s move to ban selling of products exclusively on a single marketplace would be a major blow to both Flipkart and Amazon as the online retailers have exclusive partnerships with smartphone makers—Flipkart with Xiaomi and Oppo, and Amazon with OnePlus. According to reports smartphones contribute about 50% of overall e-commerce sales in India.

Devangshu Dutta, chief executive of retail consultancy Third Eyesight, feels the revision in norms is in light of the upcoming general election. “Given that we are entering an election year, clearly, the government needed to be seen supporting the domestic constituents.”

Adds Amarjeet Singh, partner, KPMG India, “The changes are being made to appease the domestic retail lobby. The domestic players who may have been hurt by the ecommerce revolution need to make themselves more nimble than to rely on government’s interventions of this nature.”

K. Ganesh, Bengaluru-based entrepreneur and promoter of e-commerce companies such as BigBasket, Bluestone, FreshMenu, and Homelane, feels some of changes to the FDI policy in e-commerce go against the principles of free market economics. “This will negatively impact all the milestones achieved in the last 10 years during which billions of dollars of FDI has come in, millions of small sellers have had the opportunity to sell their products across India thanks to well-funded marketplaces, lakhs of new job were created at entry level. I feel there is scope of some of these measures to be clarified in the larger interest so the gains of the past are not eroded,” says Ganesh.

In May this year the world’s largest retailer Walmart bought India’s largest e-commerce company, Flipkart, for a whopping $16 billion. It was the world’s biggest e-commerce deal and gave the U.S. giant access to one of the biggest markets in the world.

Commenting on the development, Flipkart released a statement that read: “It is important that a broad market-driven framework through right consultative process be put in place in order to drive the industry forward.” India’s e-commerce poster child is of the opinion that the e-commerce ecosystem created innovations in MSME manufacturing, supply chain, warehousing, packaging and digital payments, having created thousands of new jobs. “This is just a start, the industry is set to be a major growth driver for the Indian economy and create millions of [more] jobs in the future,” the statement read, adding that “it is important that a broad market-driven framework through right consultative process be put in place in order to drive the industry forward.”

Kunal Bahl, CEO and co-founder, Snapdeal, however, spoke in favour of the changes introduced by the government in FDI norms. “Snapdeal welcomes updates to FDI policy on e-commerce. Marketplaces are meant for genuine, independent sellers, many of whom are MSMEs. These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce,” Bahl posted on Twitter.

Even smaller niche online marketplace players Qtrove welcome the new policy changes. Vinamra Pandya, founder and CEO, Qtrove, an online marketplace for curated organic food, personal care, and home décor products, believes in fostering small and medium enterprises on its platforms and let them sell their products without the pressure of predatory pricing, unrealistic discounts and cash backs. “We are not into electronics and fashion where this predatory pricing and discounts rule the roost. We welcome this decision, the only rider being we would need to see that it is a balanced ruling.”

Source: fortuneindia

E-commerce discounts may continue, but in innovative ways


December 28, 2018

Written By Deepti Govind

E-commerce firms have been reducing amount of discounts over time, say analysts. Photo: iStock

Ecommerce companies in India have been criticized for predatory pricing, but the revised e-commerce policy plans to make deep discounts a thing of the past. However, some analysts believe online marketplace is likely to find innovative ways to continue offering discounts once the dust around the new rules settles.

On 26 December, the commerce and industry ministry had issued new guidelines, reviewing its policy on foreign direct investment (FDI) in e-commerce. As part of the move, the ministry plugged loopholes to stop online retailers from selling products of companies, wherein they own stakes. Besides, the new guidelines also restrict them from entering into exclusive merchandise deals. The new guidelines will come into effect from 1 February.

Source: livemint

Online shopping discounts: Govt move to bring transparency is a long shot


December 28, 2018

As the noose around online discounts is expected to be tightened with the upcoming draft e-commerce policy, the days might be numbered for both e-commerce companies acquiring customers via deep discounts and customers used to affordable buying.

Written By Sandeep Soni

किसी प्रोडक्ट विशेष को केवल व केवल अपने प्लेटफॉर्म से बिक्री का अनुबंध करने से भी रोक (Representational Image)

As the noose around online discounts is expected to be tightened with the upcoming draft e-commerce policy, the days might be numbered for both e-commerce companies acquiring customers via deep discounts and customers used to affordable buying.

Commerce and Industry Minister Suresh Prabhu last week said that the new draft policy would focus on transparency in online pricing and discounts. The government had also pointed out in earlier draft e-commerce policy that any group company of an online retailer or marketplace ‘may’ not be allowed to directly or indirectly influence the price or sale of products and services on its platform. While this suggests the eventual end of controversial e-commerce discounts but would the government be able to pull it off?

Killing Discounts?

“It is impossible to kill discounts though it will certainly have a dampening effect on their size,” said Devangshu Dutta, CEO, Third Eyesight – a retail consulting firm. A common percentage cut on discounts across products cannot be levied since it is tough to monitor which products are getting deeply discounted and which are not and also for how long.

“How will you decide on which product, let’s say, a 10% discount is normal but 20% is more or 5% is too less and 15% is too much. Monitoring that for millions of products listed online is quite impossible,” said Harminder Sahni, founder and MD at consulting firm Wazir Advisors.

The only way you can control discounts, according to Sahni, is to get a minimum retail price for every product so that online retailers cannot sell below that price after discounts. “Otherwise I don’t see any way of controlling discounts because eventually it is their money and they are spending and no one can stop them.”

Source: financialexpress

Back-door discounting

Domestic retailers and trader bodies have long levelled charges of ‘predatory pricing’ of goods sold online by e-commerce companies such as Amazon and Flipkart “as it is damaging the trade fabric of the country,” PTI last week quoted CAIT Secretary General Praveen Khandelwal.

If not a minimum retail price and if at all the discounts are to be monitored then the government would have to think through how it would do that. “It will become somebody’s job to monitor which products are getting heavily discounted and violating whatever discount threshold there may be and bring to the government’s notice,” said Dutta. He added that whether the government does that job or only act upon a complaint will be seen ahead but the regulation in itself cannot be implemented in a blanket form.

Large e-retailers like Flipkart have re-asserted their previous stance of having no role in influencing the pricing and discounts of products listed by their sellers. “As per the government marketplace guidelines, sellers engage and transact with customers directly,” said Rajneesh Kumar, chief corporate affairs officer, Flipkart Group, adding that individual sellers/suppliers may decide to offer discounts to consumers or run other marketing promotions while the marketplace is not involved with these decisions.

However, online retailers have allegedly been indirectly funding discounts by paying sellers the amount of discounts borne by them or reducing their commission or listing fee.

“These companies reduce the commission they take from sellers in case of discount sales. That’s how they play a role in pricing. The platforms also ask sellers to offer discounts and compel them later to undertake marketing expenses, delivery charges,” Forrester Research’s senior forecast analyst Satish Meena told The Indian Express earlier. However, in the new draft e-commerce policy, this indirect influence of price might also get checked.

Emails sent to Amazon and Paytm Mall didn’t elicit responses.

Deeper Scrutiny

Credit rating agency ICRA has called for greater regulatory supervision to the existing restrictions to assuage concerns of offline retailers. For instance, apart from the FDI norms for the marketplace model prohibiting discounting, the amount of goods purchased from online retailer’s group companies is presently capped at 25% of the sales value in a financial year.

“Despite this, the disparity in pricing in the online and offline retail modes exists,” said Kinjal Shah, Vice President, Corporate Sector Ratings, ICRA, adding that, “Indirect shareholding in vendors/suppliers by e-commerce companies also cannot be ruled out. Unless such support is restricted, a pure play level playing field between online and offline retail would not be attainable.”

The government, however, in the latest FDI guidelines has barred e-commerce companies from selling products of companies that are related to them along with a limit on goods to be sold by a single vendor. The new rules, effective from February 1, 2019, is also against any preferential treatment given by e-commerce companies to any particular seller or brand.

Eventually, if the government successfully executes phasing out of heavy discounts, would e-commerce companies lose their customers to offline retailers? “Customers who have become accustomed to online experience not because of discounts but because of factors like convenience will not shift offline,” said Dutta. Greater choice of goods and convenient return/exchange policy also works in favour of the online channel.

Source: financialexpress

‘New norms to help local retailers’


December 27, 2018


The government’s move, tightening norms for online retailers such as Amazon and Flipkart, is seen as a strategy to give large and small local retailers and traders in the country a leg up, ahead of the general elections scheduled for 2019.

The norms, which are seen as helping protect domestic players, would not only help online marketplace players such as Snapdeal, and Paytm Mall but also large local companies such as Reliance that are eyeing a share of the e-commerce market in the country, according to industry watchers.

“There is a realisation in the government that after demonetisation and GST [Goods and Services Tax], they needed to give something to the traders,” said an industry expert who did not wish to be quoted.

‘Intense lobbying’

Another expert said a lot of lobbying was being done by large local retailers against big e-commerce companies in the country. “Those are the ones which are going to gain from this,” said the expert also not wishing to be quoted.

Devangshu Dutta, CEO of retail consultancy Third Eyesight, said with the general elections coming up, the government could not have ignored the demands of domestic retailers. “This includes red flags highlighting that e-commerce players have grown on the back of aggressive discounting. It is the job of any democratically elected government anywhere in the world to look at domestic interests first,” he said.

Source: thehindu

Retail 2.019: Navigating by Customer Experience

Devangshu Dutta

December 20, 2018

Do you have this feeling that 2018 went by a little too quickly? Well, however quick it seemed, it was certainly momentous for retail in India.

If 2016 was marked by the shock of demonetization, and 2017 by the pains of GST implementation, 2018 highlighted two threads – the obvious convergence of the online and offline world that had been ignored for far too long, and the interest of foreign capital in India’s consumer world.

Walmart bought India’s loss-making ecommerce leader for an eye-popping US$ 20.8 billion valuation, while ecommerce giant Amazon injecting equity into Shoppers Stop, bought Aditya Birla’s More grocery chain (49 per cent through a back-end entity), and held discussions with Future Group to acquire 9.5 per cent in Future Retail. There were rumours of a mega joint venture between Reliance Retail and China’s Alibaba, and media also reported Japan’s Softbank looking at ploughing US$200 million into Firstcry. Both rivals Amazon and Alibaba were reported to be looking at Spencer’s, one of India’s oldest retail chains currently owned by the RP-Sanjiv Goenka group.

Videos of the crush of curious crowds at India’s first, much anticipated Ikea went viral, and the company said it planned to open 40 locations over the next few years, upping its earlier projection of 25. Chinese retailer Miniso basically came out of nowhere and claimed to have clocked sales of ?700 crores in the very first year in the country.

But along with these cross-border “big bangs” we saw domestic confidence also quietly resurging. Indian retailers are not cowering before large foreign retailers and expensive ecommerce advertising splashes; today they are less defensive about their own prospects than they were two years ago. There is also a growing interest among entrepreneurs and corporates to create new retail businesses, which augers well for the diversity of competition and freshness of offerings in the market.

Going into 2019, one thing I can say with certainty is that the weather, economic and political – both in India and elsewhere – will be unpredictable, and might even turn stormy. Externally, retailers should “expect the unexpected”. To ensure that the business remains on track, however rough the track becomes, retailers must centre all major strategies and decisions on the customer. A theme that has been around for centuries, it is surprising how much it gets ignored in this most customer-facing business.

Retailers tend to divide customers into rigid segments. My suggestion would be to look at customers through the behaviour and experience lens and also recognise that the same customer behaves differently at different times and in different contexts – in effect there are no hard boundaries between “segments”.

It is often emphasised is that Indian consumers are “deal-seeking”. I don’t think we should treat this as a uniquely Indian thing: all consumers look for value-reassurance in unpredictable times and in uncertain conditions. Also remember that even in value-seeking, experience still rules. Retailers and brands that are solely focussing on price or price+feature comparisons are turning their business into a commodity. They are missing the long game: of defining the customer’s experience from the first moment of brand contact to the purchase and beyond.

In 2019, if you want to focus on a single competitive strategy, it would be this: for stickiness and sustainability, think about the customer’s experience, and actively design it, in every environment where the customer connects with you.

Lastly, technology is transformative, but tends to get restricted to being the contrast between ecommerce and physical retail. Indian retailers need to embrace technology in all forms, from using the zillions of transactions within the business and with the customer for developing actionable knowledge, to automating processes where unnecessary cost or time makes the business inefficient.

Having said that, keep the previous rule in mind when deploying at customer-facing technology – make customer-interfacing technology as invisible or intuitive as possible. When in doubt, learn from one of the leaders in the sector, Amazon: its 1-click ordering patent 20 years ago gave it a huge advantage over competitors, and it is now aiming to replicate the same seamless, friction-free behaviour physically with its Dash button. Or pick cues even from younger fashion businesses like Rebecca Minkoff, whose focus is on ease and convenience. The key reason for adopting technology is to remove friction for the customer and for processes that serve the customer.

I have no doubt that 2019 will be eventful – let the customer experience be the guiding light to keep our businesses off the rocks and afloat.

(Published in the Financial Express on 4 January 2019, under the title “Retail in 2019: Need for stronger brand-customer connections that go beyond purchase“)