Even as the Indian e-Commerce space grows at a blistering pace, thanks to fresh fund injections and aggressive marketing strategies, the economic wing of the RSS has said that such sites are a threat to Modi's 'Make in India' agenda, and are“killing domestic players in the Indian market”.
The RSS wants the government to ban foreign sites like Amazon, as well as Indian players such as Flipkartwhich have high foreign fund infusion, according to this report in the Indian Express.
The report quotes Ashwani Mahajan, SJM national convener as saying, “We are of the opinion that FDI in e-commerce should be prohibited by law. Though we do not allow FDI in e-commerce sites, they circumvent the law to sell their product in the country. Even Indian e-commerce firms like Flipkart have turned to be foreign now with funding from outside. There is a lacuna in the law and this cannot be allowed. We have asked the Finance Minister to plug loopholes in the law".
Mahajan is referring to the fact that while Foreign Direct Investment is prohibited in e-commerce sites that directly sell to customers, that it is allowed in 'marketplace models' which connect buyers and sellers. Sites like Amazon and E-Bay both run on the 'marketplace model' in India, while in 2013, Flipkart also switched to a marketplace model from an inventory model.
In the last few years, Indian e-commerce companies have been the darling of investors, with certain players like Flipkart and Snapdeal raising multiple rounds of funds from backers. According to data from Venture Intelligence, a research service focused on private equity, and venture capital in India, $273 million was pumped into e-commerce ventures in 2012, , $540 million in 2013 and $240 million through April 2014.
Flush with funds, e-commerce sites have been aggressively wooing customers with regular 'sales' that offer customers serious discounts from market rate prices, a move that has made brick and mortar store owners very unhappy. After one such 'flash sale' by Flipkart, Pantaloon's Kishore Biyani blasted the e-Commerce sites' strategy.
"Laws in this country do not allow sales below cost price. This is anti-competitive. We (at Big Bazaar and other retail brands) never sell below cost price. How can Myntra sell our products at such deep discounts and hurt our brands?", Biyani told had told Firstpost.
The Confederation of All India Traders (CAIT) lobby group has threatened to take the issue of what it calls predatory pricing to the competition watchdog.
But here again the distinction between the 'marketplace model' and directly selling to customers, is likely to mean that the law favours e-Commerce sites. As this Economic Times report points out, "In an earlier decision in a case pertaining to Snapdeal, CCI had ruled that it was only a platform for buyers and sellers and not engaged in selling itself to be engaging in predatory pricing."
It is this 'gap' that the RSS wants plugged by the government.
“Their explanation for giving high discount is that they are doing it in lieu of the data provided by customers. But ultimately, these foreign companies with deep pockets will destroy Indian retailers...So we have asked the Finance Minister to ban them by law and plug the loopholes. He has to respond to our demands in his budget", Mahajan said.
You can read the full Indian Express story here.
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Updated Date: Jan 17, 2015 16:40:00 IST