{"id":3662,"date":"2019-02-27T05:20:45","date_gmt":"2019-02-27T05:20:45","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=3662"},"modified":"2020-06-29T12:25:10","modified_gmt":"2020-06-29T06:55:10","slug":"the-impact-of-new-fdi-on-e-commerce-retailers-and-business","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/","title":{"rendered":"The Impact Of  New FDI On E-Commerce Retailers And Business"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Department of <strong>Industrial Policy and Promotion (DIPP ) on 26th December<\/strong> 2018, introduced a press note proposing to make certain changes in the <strong>existing 2017 policy<\/strong> governing foreign direct investment in the e-commerce sector. \u00a0On 27th December 2018, the Government made certain amendments in the <strong>existing Foreign Direct Investment (FDI)<\/strong> policy for online retailers.<\/p>\n\n\n\n<p>But before we discuss the <strong>new FDI policy<\/strong>, it is necessary to know what is FDI? FDI means an investment made by an individual or a firm of one country in the business of another country. Changes made in the\u00a0 <strong>Foreign Direct Investment (FDI) policy<\/strong> restricts<strong> e-commerce firms from selling products<\/strong> of entities in which they have an equity stake. As per the provision of <strong>new FDI policy<\/strong>, entities engaged in such type of business will engage only in Business to Business firms and not in Business to Consumer companies.<\/p>\n\n\n\n<p>In this blog, we will discuss the changes brought in <strong>Foreign Direct Investment policy<\/strong> and on electronic commerce retailers and business.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a61b0012ff\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a61b0012ff\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#What_is_the_Meaning_of_E-commerce\" title=\"What is the Meaning of E-commerce?\">What is the Meaning of E-commerce?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#E-commerce_Entity\" title=\"E-commerce Entity&nbsp;\">E-commerce Entity&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#Types_of_Models_of_E-commerce\" title=\"Types of Models of E-commerce\">Types of Models of E-commerce<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#1_Inventory_based_model\" title=\"1) Inventory based model \">1) Inventory based model <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#2_Marketplace_based_model\" title=\"2) Marketplace based model \">2) Marketplace based model <\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#Impact_of_FDI_policy_on_e-commerce_businesses\" title=\"Impact of FDI policy on e-commerce businesses \">Impact of FDI policy on e-commerce businesses <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#What_are_the_Guidelines_for_Foreign_Direct_Investment_on_E-commerce_Sector\" title=\"What are the Guidelines for&nbsp; Foreign Direct Investment on E-commerce Sector&nbsp;\">What are the Guidelines for&nbsp; Foreign Direct Investment on E-commerce Sector&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#What_are_the_Provisions_for_FDI_in_e-commerce\" title=\"What are the Provisions for FDI in e-commerce?\">What are the Provisions for FDI in e-commerce?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#Other_Mandatory_Conditions_of_FDI_policy\" title=\"Other Mandatory &nbsp;Conditions of FDI policy&nbsp;\">Other Mandatory &nbsp;Conditions of FDI policy&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/the-impact-of-new-fdi-on-e-commerce-retailers-and-business\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Meaning_of_E-commerce\"><\/span><strong>What is the Meaning of E-commerce?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In general terms, <strong>E-commerce<\/strong> means buying and selling of goods or <strong>products including digital products<\/strong> over a digital &amp; electronic network. ( For example buying and selling of\u00a0 goods on Snapdeal, Myntra, Flipkart, etc.)<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"E-commerce_Entity\"><\/span><strong>E-commerce Entity&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you are interested to know about <strong>guidelines of changes made in FDI<\/strong> policy, then you must have <strong>knowledge about E-commerce entity<\/strong>.<\/p>\n\n\n\n<p>This type of an entity means a company which is<strong> incorporated under The Companies Act, 1956\/2013<\/strong> to conduct electronic commerce business. A foreign company which is owned by a person resident outside India and engages electronic commerce business falling under the definition of e-commerce entity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Models_of_E-commerce\"><\/span><strong>Types of Models of E-commerce<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>There are two types of models of E-commerce:<\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Inventory_based_model\"><\/span><strong>1) Inventory based model <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Marketplace_based_model\"><\/span><strong>2) Marketplace based model <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>1)<strong>Inventory based model<\/strong>\u00a0 &#8211; Inventory based model refers to an activity where <em>an e-commerce entity owns an inventory of goods and sells<\/em> the goods to the consumer directly.<\/p>\n\n\n\n<p>2)<strong> Marketplace based mode<\/strong>l &#8211; Marketplace based model is meant for providing information technology platform by an e-commerce entity on a digital and electronic network to act as a promoter or <em>coordinator between the buyer and seller<\/em>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact_of_FDI_policy_on_e-commerce_businesses\"><\/span><strong>Impact of FDI policy on e-commerce businesses<br><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The online <strong><em>e-commerce business<\/em><\/strong> <a href=\"https:\/\/en.wikipedia.org\/wiki\/E-commerce\">[1]<\/a>  entity like Amazon and Flipkart encourage their sales and source through their vendors. The customers who buy products sold by these vendors get additional and more benefits in terms of <strong>fast delivery, discount and cash back<\/strong>.<\/p>\n\n\n\n<p>As the <strong>new norms of FDI policy<\/strong> aim to stop the <strong>anti-competitive behavior<\/strong> of these e-commerce entities, so <strong>changes made in FDI policy<\/strong> must have an <strong>adverse impact on E-commerce businesses<\/strong> as well as companies. Vendors of Amazon and Flipkart cannot sell their own products on the company&#8217;s portal.<\/p>\n\n\n\n<p>Amazon and Flipkart now cannot insist on their exclusive relationship with the brand owners. As per <strong>norms of FDI policy<\/strong>, Amazon and Flipkart are prohibited to offer a huge discount to their customer.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Guidelines_for_Foreign_Direct_Investment_on_E-commerce_Sector\"><\/span><strong>What are the Guidelines for&nbsp; Foreign Direct Investment on E-commerce Sector&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Recent <strong>FDI policy of 2017<\/strong> provides some <strong>guidelines for Foreign Direct investment<\/strong> in the e-commerce sector. As per such guidelines:<\/p>\n\n\n\n<p>In operation of the <strong>market place model, 100% FDI<\/strong> is permitted.<\/p>\n\n\n\n<p><em>No FDI is permitted in inventory based model.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Provisions_for_FDI_in_e-commerce\"><\/span><strong>What are the Provisions for FDI in e-commerce?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Department of Industrial Policy and Promotion had clarified the following provisions for <strong>FDI in e-commerce<\/strong>:<\/p>\n\n\n\n<ul><li>As per <strong>recent FDI policy<\/strong>, FDI is permitted only in the Business to business (B2B) e-commerce segment and not in the Business to consumer(B2C) segment. <em>(Inventory based model)<\/em><\/li><li>According to the rules and <strong>regulation of FDI policy, 2017<\/strong>, B2B an entity providing marketplace shall not either directly or indirectly affect the sale price of goods or services. If an entity does so, then the business will be treated as Inventory based model.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_Mandatory_Conditions_of_FDI_policy\"><\/span><strong>Other Mandatory &nbsp;Conditions of FDI policy&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>The Government of India made changes and added certain conditions in the FDI policy. Following are certain conditions:<\/em><\/p>\n\n\n\n<ul><li>The market place e-commerce firm cannot exercise its <em>control over the inventories of any inventory firm<\/em>.<\/li><li>Market place entity is permitted to enter into transactions with other sellers registered it&#8217;s <strong>portal on a B2B basis<\/strong>.<\/li><li>A Marketplace can provide support services to sellers in respect of call center, payment collection etc.<\/li><li>Digital and electronic network will include <strong>TV channels<\/strong>, computer networks any other interment application used in an automated manner. (<strong>Mobiles, Webpages etc<\/strong>).<\/li><li>An e-commerce entity shall not <em>sanction more than 25%<\/em> of the sales value on financial year basis affected through its marketplace from one vendor or their group companies. [source: <a rel=\"nofollow noopener noreferrer\" href=\"https:\/\/dipp.gov.in\/sites\/default\/files\/CFPC_2017_FINAL_RELEASED_28.8.17.pdf\" target=\"_blank\">dipp.gov.in<\/a>]<\/li><li>In a market place model, goods or services available for sale on the website must clearly provide name, address and other necessary details of the seller.<\/li><li>After the sale of the goods and services to the customer, customer satisfaction will be the responsibility of the seller.<\/li><li>Under the marketplace model, payment of sale may be done by an e-commerce entity in compliance with the guidelines of <strong>Reserve Bank of India<\/strong> <a href=\"https:\/\/www.rbi.org.in\/\">[1]<\/a> .<\/li><li>Guidelines on cash and carry wholesale trading will only <strong>apply to the B2B segment<\/strong>.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>From the above discussion, we can conclude that the economic development of the country strongly depends on FDI. The most <strong>important outcome of FDI in India<\/strong> is its contribution to the growth of the Indian economy. The main purpose of the <strong>changes made in the FDI policy of 2017<\/strong> is to prohibit the anti-competitive behaviors of such entities and to enhance the growth of small scale business entities. However, there has been an adverse <strong>impact of policy changes of FDI<\/strong> on the businesses. Now, they are restricted to offer huge discounts on the products unlike they used to do before. We can say that the <strong>new FDI policy<\/strong> has impacted the business in both ways- positive and negative.<\/p>\n\n\n\n<p>If you want to know more about the impact Of&nbsp; New FDI policy On E-Commerce Retailers And Business, then kindly <a href=\"https:\/\/swaritadvisors.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">contact us<\/a>.<\/p>\n\n\n\n<p class=\"text-left\"><b>Also, Read<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/how-fdi-helps-private-limited-companies\/\">How FDI helps Private Limited Companies<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Department of Industrial Policy and Promotion (DIPP ) on 26th December 2018, introduced a press note proposing to make certain changes in the existing 2017 policy governing foreign direct investment in the e-commerce sector. \u00a0On 27th December 2018, the Government made certain amendments in the existing Foreign Direct Investment (FDI) policy for online retailers. But [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3665,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[401,692],"tags":[10,368,404,19,405],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3662"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=3662"}],"version-history":[{"count":14,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3662\/revisions"}],"predecessor-version":[{"id":11345,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/3662\/revisions\/11345"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/3665"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=3662"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=3662"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=3662"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}