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Retailers present a united front, want new DIPP guidelines on FDI to be implemented

by Meenakshi Kumar
12 Apr 2016

The Retailers Association of India (RAI) has urged the government to implement the Department of Industrial Policy and Promotion (DIPP) guideline for FDI in the retail sector. Retailers from across the country from different retail categories held a press conference to draw the government’s attention towards violations of FDI norms by e-commerce marketplaces. This was being done despite the DIPP’s strict guidelines which had made it clear their role in pricing, warranty and inventory management in its Press Note 3 issued on March 29.

Top representatives from leading Indian retail companies such as Aditya Birla Group, Essar, CMAI, Future Group and Shoppers Stop along with representatives of RAI shared their views with the media. Kumar Rajagopalan, CEO, RAI, pointed out that the ‘note is a testimony to the fact that the government wants to ensure a level playing field for all channels’ and he applauded the government for taking a stand on the move.

Rules violated, not a fair game

The clarifications made in many important aspects of FDI in e-commerce were welcomed. It has been seen that many e-commerce players in the country were accessing FDI funds while behaving like quasi retailers. The new guidelines are trying to set this straight by clearly defining what construes an e-commerce entity following a marketplace-based model and what it can or cannot do if it seeks FDI through the automatic route. Kishore Biyani, Founder & CEO, Future Group, revealed that there is still ongoing heightened activity in contravention to the clarification. “People are still continuing with advertising, still behaving the same way they used to behave.” And this is despite the marketplace and inventories being defined very well. The business, Biyani believes, is continuing in the same way. And discounts are still happening. There is more direct buyer-seller relationship. Hence, he strongly feels the need for somebody to raise their voice on this.

Level-playing field most important

A level-playing field can be created only if the government puts its enforcement machinery in action. Retailers feel that e-commerce ventures that seek international funds as well as international e-commerce players adhered to the laws of the land. B S Nagesh, Chairman, RAI, said that the retailers only wanted a level-playing field. Rahul Mehta, President, CMAI, said “No policy stands still. But clarifications are needed. The spirit of the policy should be fully implemented. We don’t have new guidelines, only clarifications. We would like to see what the government will be doing. The question is implementation. Today most companies follow a standard inventory business model. The inventory of goods is with the service provider.” Mehta questioned how can everyone have their own private label and claim that they are only a marketplace. It is, he believes, a violation of the spirit of the law and the letter of the law.

Pranab Barua, Business Director & Group CEO– Retail & Apparel, Aditya Birla Group felt there should be a level playing ground for both offline and online retailers. “The marketplace is a platform where buyers and sellers meet. Whether it’s enabled by technology doesn’t matter. It’s a one to one transaction. We are in a situation where multi brand retail is not allowed. Actually we’d welcome it as long as it’s available to both online and offline. If it’s not allowed to offline it should not be allowed to online.” He went on to say Flipkart and the technology service providers should not give gift vouchers. It should provide the technology to ensure the website is running. This is what the policy clarification clearly states. “Violations are not good for the industry, not good for the country. Now the entire association has come together and there are more things to be done. There are ten million retailers and this is a retail group.”

The retailers are confident that if the policies are adhered to, then a new environment of collaboration between retailers and marketplaces can be created which would in turn ensure the convenience of the customers. Rajagopalan reiterated that ‘retailers would be happy to collaborate with them in the same way as they have collaborated with malls so far’. To ensure enforcement of the new DIPP guidelines on FDI in e-commerce, retailers have also submitted a collective note to DIPP. In their submission, retailers have suggested further clarifications to the clauses in the policy that will help prevent its contravention.