Even as foreign direct investment in e-commerce did not get the green signal in the maiden Budget of the Narendra Modi-led government, the move to allow foreign companies to directly sell goods online is being seen as a positive step for the e-commerce sector. Many argue it is one of the first steps in opening the e-commerce sector, which has experienced notable growth in recent times.
Analysts say that key players in the electronics segment such as Samsung, LG, and Panasonic will benefit as most of them currently sell through intermediaries or franchisee. Even the online portals of most electronics companies that manufacture or assemble in India are managed by third parties as the existing regulations prohibited them from selling directly to consumers.
However, experts say imported products will fall outside the ambit of this eased norm, and the sector is seeking clarification on who exactly will gain from this announcement and whether there will be a distinction between manufacturing in India and abroad. The Budget speech does not make it clear.
"What does one mean by manufacturing? Will it also cover products which are assembled in India?" asked Gaurav Gupta, senior director, Deloitte India. "I think products like air-conditioners and television which are assembled in India should be allowed to be sold online but the finished imported products will fall in the grey area."
Companies don't have a clear picture yet on whether selling online would reduce prices of products. However, allowing foreign manufacturers to sell directly through e-commerce will give a positive message to the multi-national companies manufacturing in India, according to Manish Sharma, managing director, Panasonic India. "The supply chain will be eased out, the cost of inventory will come down and it will enhance the credibility of e-commerce to the consumers," said Sharma. The company plans to launch its online retail platform soon.
Leading e-commerce player Amazon refused to comment on whether it will consider manufacturing its own range of products such as Amazon-branded tablets or phones. The company, however, said the government's move is a positive statement of intent for the e-commerce sector. "Following this statement, we are hopeful of a more positive and liberalised policy on e-commerce in the near future aimed to help grow the manufacturing industry," said a company statement.
E-commerce players rule out any price war online because of this development. "It's only the internal arrangement which will change. Already, electronic manufacturers have a problem with price under-cutting by e-commerce players," said a prominent e-retailer.
"This is a step-by-step journey and we hope that the e-commerce sector continues to open and evolve in the future," said Pravin Sinha, founder and CEO, Jabong, another e-commerce company.
Currently, foreign companies such as Amazon or eBay cannot hold inventory and sell products online under the FDI regulations in e-commerce. Experts say imported products will fall outside the ambit of this eased norm.