Lesser clicks, a boon for bricks

Lesser clicks, a boon for bricks

1. The Department of Industrial Policy & Promotion new rules on the foreign direct investment (FDI) policy for e-retail has benefitted the offline retailers also known as brick and mortar (B&M) retail sector.
2. Brick and mortar(B&M) refers to businesses that are bound to a physical space, like a specific building that customers go to in order to buy products. After new rules, offline retailers did not faced any pressure whereas most e-commerce portals were forced to take down thousands of products from their portals to meet new government regulations.
3. Recently, DIPP had issued a clarification to the existing rules pertaining to Foreign Direct Investment in e-commerce companies. The new rules were (a)If an entity is owned by an e-commerce marketplace(ECM),it cannot sell its products on the platform run by the same ECM (b)A single vendor can’t account  for more than 25% of sales in an ECM or platform and (c)The rules puts curbs on exclusive partnerships with brands or providing favorable services to a few vendors.
4. In 2016,the government permitted 100% FDI in the marketplace model of e-commerce, but not in the inventory-based model. In a marketplace model, ECMs act as platform for vendors to sell their products. In the inventory-based model, ECMs own and sell products.
5. The new rules of the DIPP policy was directed at protecting small vendors on e-commerce websites. It seeks to ensure small players selling on the portals are not discriminated against in favour of vendors in which e-commerce companies have a stake. It will also ensure a level playing field for all vendors looking to sell on the e-commerce portals.