Earlier this week, the Indian government proposed changes to the country’s e-commerce rules that would ban online commerce marketplaces from holding flash sales, hold them liable for negligent conduct by sellers, and ask them to promote domestic goods, among other things.
These new requirements may impact not only online retail giants like Amazon and Flipkart but also other online commerce players that deploy marketplace models like food ordering giants Zomato and Swiggy, online travel firm MakeMyTrip, ride-hailing service providers Ola and Uber, as well as home services company Urban Company, a report by local media Economic Times said, citing sources.
Several of these companies are currently in the process of reviewing the potential impact of the proposed rules. Many are likely to participate from Friday in discussions through industry associations such as the Federation of Indian Chambers of Commerce and Industry, the Confederation of Indian Industry, and IndiaTech, the report added.
An industry insider KrASIA spoke to believes the way rules are worded, it can be construed that food ordering and cab-hailing companies fall under the scope and applicability of the rules, but the intent does not seem to be that.
“Even as e-commerce is defined by the government as all goods and services bought and sold over electronic or digital product, I think the intention of these changes is not to cover food delivery or ride-hailing companies,” he said. “It is the case of bad drafting.”
Leveling the playing field
Grouping together other sectors with online retailers has become a source of worry and discontent among all e-commerce firms.
Many have expressed concerns over a ban on flash sales. However, the government has clarified that conventional flash sales by third-party sellers are not banned on e-commerce platforms. It is applicable in cases where “certain e-commerce entities are engaging in limiting consumer choice by indulging in back-to-back or flash sales,” wherein sellers on the platforms do not carry any inventory but merely place an order with another seller controlled by the platform. In a way, these flash sales end up benefiting e-commerce entities as they control the sellers that ultimately get the consumers’ orders.
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“The flash sale complaint came from the industry body IAMAI (Internet and mobile association of India) as most flash sales happen for smartphones,” said the industry insider quoted above on the condition of anonymity. “Because online channels have become dominant and are eating the margins and volumes for the offline players, IAMAI and CAIT (Confederation of all India traders) work closely together and try to create a nuisance for online players.”
“There is no doubt online players are sucking the lifeblood of brick-and-mortar stores and flash sales hurt their business, so a lot of desperate moves coming from these lobby bodies,” he added.
Another big concern for e-commerce platforms that sell imported goods or services is that the new guidelines ask the marketplaces to promote domestic alternatives before a consumer makes a purchase.
To ensure that domestic manufacturers and suppliers get fair and equal treatment on e-commerce platforms, the draft rules stipulate that e-tailers shall “incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure a fair opportunity for domestic goods.” Until last year, the government wanted online marketplaces to show the country of origin for all the listed products.
“Most of the buyers also do not care about the origin of a product if it gives them good value for money. Adding a filter to show the country of origin for a listed product can be done, but if you want e-commerce players to give corresponding listings of domestic products, it is way beyond what a marketplace should do,” said the industry veteran.
The fallback liability factor is also a cause of worry for services like travel and restaurant aggregator apps as they make the online marketplaces liable if “a seller registered with such an entity fails to deliver the goods or services ordered by a consumer—due to multiple factors including negligent conduct.”
“The concept of fallback liability is bizarre. Marketplaces can be held responsible for quick refunds since the money goes to sellers after 10–15 days, but not for the bad quality products, the industry insider added.
Internet companies also argue that since the government wants online marketplaces not to influence pricing and let sellers act independently, why the onus of timely delivery and product quality is put on them.
“There are e-commerce companies that control sellers, and the government is right in trying to stop that practice,” said the industry insider. “Despite the previous press notes by the government, Amazon and Flipkart are still trying to be [direct] sellers, in a more layered and convoluted way. The government is trying to catch them on every iteration they can think of.”
However, the source believes in the process of prescribing too many do’s and don’ts, the rules have become impractical to implement. “Consumers do not care if a seller is related to Amazon or Flipkart, many actually prefer to buy from them because the quality is assured.”
“The rules overall are badly thought through, they go beyond what consumer affairs should look at,” he added.
However, many industry experts believe these new rules will establish a level playing field between online and offline retail players.
“It is going to put a lot more responsibility on the online players to be answerable to consumers and statutory authorities over their pricing policies and marketing strategies something that will eventually lead to a level playing field with offline retail, thus being beneficial to consumers in general,” Jay Jhaveri, partner at Bhuta Shah & Co LLP, a Mumbai based accounting and financial services firm, told KrASIA. “It is going to start an era of purifying the e-commerce businesses in India.”