New electronic and smartphone brands to be hit by e-comm FDI policy

Apart from causing inconvenience to e-commerce marketplaces, the new e-commerce FDI policy has been proving to be a challenge for electronics and smartphone brands.

The new policy is set to hit a lot of new brands which are entering India through the e-commerce route where the cost of operation is generally low. The low operation cost allowed them to exercise predatory pricing putting small retailers at disadvantage. But, things won't be the same from February 1, 2019.

Now, e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform, as per the commerce ministry. Besides, the policy further said a single vendor on a platform cannot sell more than 25 per cent of the overall value of transactions, of a marketplace. In case that single vendor is selling more than 25 per cent, then that will be considered as maintaining an inventory, which is against the FDI laws of the B2C consumer market.

Among many things, this has raised doubt over the future of online exclusive electronic and smartphone brands to continue their strategy of exclusivity. And they have sought more clarification on policy from the marketplace.

Already operational brands such as BPL, Blaupunkt TV, Sanyo, Tenor, Thomson, Amazon Basics and Meizu among many operating through Amazon and Flipkart are not averse to tweaking their business models.

One of the TV brands Super Plastronics, selling on Flipkart, thinks that the policy will not hamper their business as the marketplace has no stake in the brands. It can continue selling to other sellers. A few other brands are keen to continue online exclusivity to avoid confrontation with offline retailers.

In recent times, smartphone brands such as Xiaomi and OnePlus garnered market share in the Indian market by being exclusive to Flipkart and Amazon respectively. Later they move on offline sales channel.

With a new policy in place, these brands have to relook at their business strategy. The government this time seems more clear with rules as there was a need to curb anti-competitive behaviour in the e-commerce industry and create a level playing for all stakeholders.