|Monday, 10 June 2013 00:00|
Amazon offering an e-commerce marketplace in India shows the futility of the rules against FDI
Given that what is sold through e-commerce sites in the country is very different from what kiranas sell, it was never clear why FDI was banned in e-commerce firms selling to the end-consumer, or B2C in jargon. But if this is banned, how do you explain FDI in top e-tailer operations in the country? Simple, a loophole in the law which allows FDI in B2B e-tailing. So, the FDI comes in B2B company A which, when there is an order placed on India e-tailer B, simply makes a sale to B. Firm A uses the FDI to set up the supply chain and Firm B does the selling. Jugaad at its very best. E-tailing giant Amazon has found an even bigger loophole. It offers a platform, a marketplace as it were, where wannabe buyers log in to get great deals. But since Amazon isn’t allowed in the B2C business, it lets out its premises in quite the same way a shopping mall would in the physical retail format,and the orders are fulfilled by a local Indian firm which pays a commission to Amazon — a great model, it even saves Amazon the costs of setting up a supply chain. Sadly, India is full of such loopholes. WLL-mobile phones were borne out of this loophole, not-for-profits schools turn for-profit with management services firms in the middle. Why not just dump the charade since, in any case, the original law never made much sense to begin with?