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Gurbir \n Singh and Vishal Krishna, Businessworld\n <\/i><\/p>\n
Gurbir \n Singh and Vishal Krishna, Businessworld
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New \n Delhi\/Bengaluru, 9 July 2015<\/i><\/p>\n
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As \n many as 12 big retailers, including Future Group, Landmark, Shoppers \n Stop and Globus, met Commerce Minister Nirmala Sitharaman in New \n Delhi on Wednesday and pitched strongly against the Union government’s \n proposal to grant 100 per cent foreign direct investment (FDI) \n status to e-commerce and e-tailing companies.
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Led by Future Group CEO Kishore Biyani and Shoppers Stop vice \n chairman B.S. Nagesh, organised retailers demanded a level playing \n field between the brick-and-mortar retail industry and e-commerce. \n <\/p>\n
They also presented a memorandum highlighting the violations \n and what they call "malpractices" of e-tailing giants \n like Flipkart and Amazon, who they claim have made a mockery of \n the current 49 per cent cap on FDI in organised retail.
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"It was a good meeting. The minister gave us a long and \n patient hearing. We asked her: On what grounds was the government \n discriminating between physical retail and technology-based ecommerce?" \n Kishore Biyani told BW Businessworld.
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The Commerce Ministry has lined up a series of consultations \n with other stakeholders too. Sitharaman will meet e-tailing chains, \n including Flipkart, eBay and Snapdeal, on 10 July and the chief \n ministers of various states on 15 July before the issue is decided \n by the Union Cabinet.
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E-tailers have raised Rs 24,000 or more and the digital purchase \n of consumer goods has been galloping over the last 2-3 years. \n Impressed by the growth figures, the government is sympathetically \n looking at a proposal to grant this sector "100 percent FDI" \n status.
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"Investments will help e-tailers scale up to many more cities. \n Smartphone usage has been high and there is a clear trend that \n people will also shop from homes," says Vipul Parekh, co-founder \n of Big Basket.
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Retailers’ Concerns However, the details of the Commerce Ministry’s \n intent are not yet out in the open. Retailers fear that if e-tailers \n are allowed better access to foreign capital, the level playing \n field between two types of consumer services will be disturbed \n and e-tailers will steal a march over access to supply chain logistics. \n The foreign monies raised by the e-tailers will enable them to \n create a strong warehouse-to-home connect, and they can even dominate \n in segments such as delivering fresh fruits and vegetables.
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Perhaps the only thing keeping e-tailers from making a clean \n sweep would be the fact that 70 per cent of Indians live in rural \n areas where access to smart phones and computers is limited. Management \n consultant Gartner predicts that there will be more than 240 million \n smart phones bought per year by the Indian public. The total broadband \n penetration can double to 200 million by the same period. But \n consultants have mixed reactions.
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"Policy in India cannot look at retailing in a western \n homogenous growth model. It surely cannot open up FDI without \n looking at the impact on socio-economic and cultural conditions," \n said Devangshu Dutta, CEO of Third Eyesight, a retail consultancy. \n He adds that the government needs to open up FDI in a phased manner. \n
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This is true because over the last three years there has been \n a policy paralysis that has stalled the retail industry. The e-tailers \n Flipkart, Snapdeal and Amazon follow a market place model and \n yet end up losing more than Rs 9,700 crore on discounting and \n reverse logistics alone. <\/p>\n
Hundred per cent FDI is allowed in market places. "The e-commerce \n industry needs a fillip and the government has already shown interest \n in making India an investor-friendly country," says Rajiv \n Khaitan, founder of Khaitan and Company, a law firm. <\/p>\n
"Rentals have always eroded the business profits of brick \n and mortar retailers," says Sanchit Vir Gogia, CEO of Greyhound \n Research. He adds that with FDI only in e-tailing they, the brick \n and mortar retailers, can use their stores more effectively in \n delivering goods through their own e-tail channels across cities \n and towns. "It saves so much real estate cost that can directly \n go in to shareholders income in the long run," says Gogia. \n <\/p>\n
Biyani, on the other hand, says the government’s definition of \n e-commerce as technology-based trading as basically flawed. "Don’t \n retailers like us use electronic technology to sell goods as well? \n Or, don’t e-tailing chains have a huge brick-and-mortar backend? \n So on what basis is the government favouring e-commerce as a special \n category?" Biyani asks.<\/p>\n
The case of the retailers is that if the government wants to \n open 100 per cent FDI, it must do so for all retail trade, irrespective \n whether is sold through physical stores or through digital channels. \n This is something the Union government can do only if it willing \n to take on the wrath of several lakhs of mom and pop kirana stores \n in the country.<\/p>\n