The new Foreign Direct Investment (FDI) policy that has come into existence from February 2019 has impacted the e-commerce businesses heavily in India.
Establishing and running a business could be compared to a roller coaster ride. Sometimes, things are exciting while at other times, things can be daunting and horrifying. Every business industry undergoes different challenges and rough situations, which either helps a firm in emerging victorious or digs deeper into trouble, which may eventually result in either some kind of loss or business failure.
A Policy Favouring the Offline Businesses
The new Foreign Direct Investment (FDI) policy that has come into existence from February 2019 has impacted the e-commerce businesses heavily in India. The strategy for providing amazing discounts on products and services that were available online, rapidly monopolised thousands of products across categories on different days, making this industry boom and becoming increasingly popular among the new age customers.
This strategy of different e-commerce websites also heavily affected offline businesses and brick-and-mortar stores. Customers in huge numbers were seen making the shift from offline to online platforms in order to purchase products at a very nominal price as compared to the offline shops.
Pranav Jain, partner at Law firm, MDP and Partners shares, “It is a strategic decision from the government to promote business and create livelihoods by keeping competition alive and protecting small retailers.
It is to prevent this consumer behaviour and create a level playing field between offline and online retail that seems to be the underlying thought behind the circular on Foreign Direct Investment.”
E-commerce Platforms taking it Slow
Post new FDI policy, e-commerce brands have restricted themselves from providing heavy discounts to its customers. Nothing is being sold below the cost price anymore. In fact, various e-commerce brands are taking the process slowly, waiting for the next time when the government takes charge on the same topic.
Abhishek Ganguly, MD, Puma India says, “Deep discounts have stopped completely. He said the discounts offered in the marketplaces were down by 11-14% in the January to March period.”
The Happy Offline Lobbies
There is a stark contrast in the discounts which are being offered by e-commerce brands in today’s time as compared to the past. The new FDI policy has made a great impact on the sales of these online platforms, eventually keeping the offline lobbies happier than ever.
There was a time when e-commerce websites used to cannibalise sales of brick-and-mortar stores. The scenario had worsened to an extent that it led to the closing down of many shops, resulting in loss SMEs, which business owners had established over decades.
Arvinder Khurana, President, All India Mobile Association explains, “Online discounting on smartphones has come down, although it remains to be seen if this will end after the next government takes over or continue until Diwali.”
Opportunities for Offline Businesses
The break which the Indian government has applied on the selling of online products and services has eventually opened the gate of opportunities for offline business owners. Offline businesses have been complaining for a long time now about the heavy discounts being offered by different e-commerce websites.
But now the scenario has changed. While e-commerce brands are restricted in terms of providing heavy discounts to their customers, offline business owners could utilise this opportunity by targeting to attract the same customers that preferred shopping online. Treating them with quality service along with relevant discounts can eventually keep them happy while purchasing your products and services.