Following new FDI policy, online exclusive brands seek clarity from marketplaces

After the government wounded the e-commerce sector with a new foreign direct investment (FDI) policy, online exclusive electronic and smartphone brands are uncertain of their future, and have sought clarity from marketplaces and their legal teams, The Economic Timesreported.

Executives of these companies may tweak their business models to cope with this change. They said there isn’t enough information about the development yet.

According to the new policy, “any e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only”.

Brands that operate as online exclusives through Flipkart or Amazon include BPL, TCL’s iFFalcon, MarQ, Blaupunkt TV, Sanyo, Tenor, Thomson, Amazon Basics and Meizu.

The companies may not lose any business as the products are sold to different sellers, not to any marketplace, said Avneet Singh Marwah, CEO of Super Plastronics, the licensee for Thomson and Kotak TV brands sold on Flipkart quoted in the report. He added that the marketplace has no stake in the brands.

BPL seeks more clarity and wants to dodge offline competition.

“The choice of the channel will remain. We are keen to continue online exclusivity to avoid confrontation with offline retailers on pricing and other issues which a lot of brands are now facing by selling both online and offline,” COO Manmohan Ganesh said in the report.

Smartphone brands that will mainly take the hit are OnePlus and Xiaomi, who gained market share through exclusive deals with Flipkart and Amazon. However, both companies have entered offline sales of late.

New brands entering the country through the e-commerce marketplaces will now be affected. Most such brands were using low cost of operations in the online medium and predatory pricing to make their mark in the market, according to the chief of a leading appliance maker.

Industry representatives said that big brands with a major offline presence may not be as affected by the policy change.

The new policy directs e-commerce entities to not exercise control or ownership over the inventory to be sold.

It said that the inventory of a vendor is said to be controlled by the marketplace if more than 25 percent of purchases of such vendors are from the marketplace entity or its group companies.Some brands, including electronics and smartphones, supplied their products to Amazon and Flipkart’s wholesale entities. These entities would then sell to sellers, for the product to reach the end customer. This will now have to be reworked in compliance with the new laws.