E-commerce: 25% cap on sales to end monopoly of few vendors

After 100% FDI, DIPP has put a condition an e-commerce entity will not be permitted more than 25% of sales through its marketplace from one vendor or their group companies

The 25% limit on single-vendor sales on e-commerce marketplaces having foreign investment is aimed at ending the monopoly of a few big sellers and encouraging more small and medium players to sell their goods online, a senior official said.

Some e-commerce players, industry experts as well as IT industry body Nasscom are of the view that capping sales from a vendor at 25% of the total sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items.

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"The capping will also end the monopoly of one or only few sellers on the marketplace platform. The condition will give huge opportunities to thousands of small and medium vendors to sell their goods online," the official in the Commerce and Industry Ministry said.

Fixing of the limit for a single vendor was important as it would ensure that marketplace is true representation of its nature, the official added.

Permitting 100% FDI in marketplace model of e-commerce, the Department of Industrial Policy and Promotion (DIPP) has put a condition that an e-commerce entity will not be permitted more than 25% of the sales through its marketplace from one vendor or their group companies.

Nasscom had said that due to this cap, the industry might face difficulties in case of sale of electronic items, where a vendor may be offering exclusive access to certain items or discounts.

Further, the guidelines or clarification on FDI in e-commerce, the official said, would lead to growth of several ancillary activities involved in the sector such as warehousing and logistics.

"These norms mainly aimed at striking a balance between e-commerce and brick and mortar stores," the official added.