Indian e-commerce is back on track after a slump in the form of FDI policy

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Indian e-commerce sector has witnessed some major ups and down in recent months as the new FDI policy by the Indian government was introduced. The market is dominated by two major players namely, Amazon and Flipkart. Amazon is a US-based entity and the FDI policies have created troubles for them. Flipkart is an Indian entity but 77% of its stakes are now owned by American retail giant WalMart. The new FDI policy bars foreign players from executing their existing strategies in the Indian market.

The new FDI policy was implemented from 1st February 2019 and the sales in the month dipped drastically. Reports show that in the first of the month the sales performance was poor compared to the second half. However, most of the companies selling their products online via the major platforms have found loopholes in the FDI policy. They have resorted to ways that could counter the policy.

Overall, the policy was aimed at benefitting the local Indian companies and smaller layers. The larger players dominate the market and they give preferences to the vendors that are extremely beneficial for the company. This mentality throws the smaller players out of the game and at a huge disadvantage. The government is trying to capitalize on the current growth rate of the Indian companies compared to the global majors. This is the best time according to the government, to give assistance to the local players.

E-commerce players such as Snapdeal are performing well but at scale comparison, it does not stand a chance against the giants Flipkart and Amazon. Initially, Snapdeal was competing to be one of the largest e-commerce players in India but it turned out negatively. They started losing out to both Flipkart and Amazon very quickly. They had to sell their online payment arm Freecharge to continue with their e-commerce business. Finally, they rejigged their top-level management and revamped their strategy. They left the top tier market and focused on low priced, bulk sales. After a year now, Snapdeal is performing very well in their category. The new FDI policy will help Snapdeal and similar entities in India to prosper.

As far as consumers are concerned, they are not loyal to a particular platform. Any platform that provides decent goods at reasonably affordable prices and good service is good to go for the average Indian consumers.

It is expected that the sales will grow during the major summer events such as the Indian Premier League and the Cricket World Cup after that. These are not holiday seasons but since cricket is celebrated in Indian religiously, these events become a hot plate for most of the businesses especially in the electronics and FMCG sector. Moreover, the sales peak during the festive season in India that comes around late September and October. During this period, the Indian consumers are in their shopping frenzy. The e-commerce platforms are looking to make up for the dip in February’s sales during the upcoming Holi festival in March.

-Soumya De

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