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End the etail hypocrisy PDF Print E-mail
Monday, 24 October 2016 00:51
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Big Indian offline retailers at disadvantage due to this

 

Considering the billions of dollars that are coming in as investments in the etail sector in the country, it is not surprising the government is reluctant to end the party. But, as a result of etailers being able to offer huge discounts, they are beginning to hurt not just big online retailers in the country but are also threatening to disrupt the models of white goods suppliers as buyers are starting to desert their offline stores. As the ongoing etail sales suggest, while the discounting is lower than in the past, it is still quite significant. While the law now says that etailers can no longer fund discounts – this was done to prevent unfair competition since the offline players do not have access to free PE/VC funding – it is difficult to understand how the vendors selling on etail marketplaces are funding such huge discounts, nor is there any rational explanation for why they would even want to do so. In the event, while those who are complaining about high etail discounts are told these are no longer being funded by etail marketplaces, there is no way to actually know if this rule is being followed. Indeed, the department of industrial policy and promotion (DIPP) which is in charge of etail policy openly admits that monitoring the implementation of the policy is not its job, but that of RBI and the enforcement directorate (ED).

 

Which is why, top retailers met finance minister Arun Jaitley last week, to ask for a level playing field for brick-and-mortar players. There is, of course, little that the finance minister can do to ensure the etail policy is adhered to in both letter and spirit. What he can do, however, is to change the policy on retail to allow 100% FDI – once that is done, there will be a genuine level playing field as big global retailers/PE funds can also provide cheap/free funds to their Indian units or joint ventures to be able to compete with etailers on a mixture of discounts and quality of merchandise/service. Given it was really the big retailers who were instrumental in blocking FDI in multi-brand retail, the government can easily open up the sectors now – few foreign retailers can buy land in neighbourhood markets to be able to threaten kirana shops, the BJP’s core constituency.

 

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