Hyderabad: Even as the competition is heating up in India’s e-commerce space with each successive day, Indian companies have a clear edge over foreign players when it comes to operations and sustainability, says an expert working in Hyderabad-based Indian School of Business (ISB).
In a chat with ETV Bharat, Kiran Pedada, Assistant Professor of Marketing at ISB, said that operating in India’s e-commerce sector won’t be a cakewalk for multinational platforms like Amazon and Walmart despite their deep pockets and rich global experience as the retail landscape in the country is much more complex than usual perceptions.
“As smaller towns and cities are the next growth centers for e-commerce companies, language, logistics and infrastructure will definitely pose challenges for foreign entities,” said Kiran, who has done extensive research on operations of global companies in emerging markets.
According to Kiran, Tatas and Reliance have the know-how to quickly adapt to the country’s heterogeneous retail market as they already have handled pan-India operations for decades.
Kiran’s comments assume significance as the stage is set for a four-cornered battle for India’s e-commerce market with the recent entry of the Tatas’ in the e-grocery segment.
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Last week, the Tata Group sought the Competition Commission of India’s (CCI’s) approval for its plan to buy 64.3 per cent stake in BigBasket.
According to media reports, Tata Digital Ltd, a wholly owned unit of Tata Sons Ltd, will launch a super e-commerce app soon.
Currently, India’s e-commerce is dominated by two foreign players (Amazon and Flipkart) and one Indian company (JioMart).
While JioMart is backed by the Mukesh Ambani-led Reliance Industries Ltd, Amazon and Flipkart are controlled by US-based Amazon and Walmart, respectively.
Notably, Amazon is the world’s largest online retailer, while Walmart is the world’s largest offline retailer.
Policy Hurdles
According to Kiran, the existing policy framework is also not in the favour of foreign companies.
“Broadly, India has two e-commerce models – marketplace model and inventory-led model. The major obstacle for foreign entities is that the current policy allows 100 per cent FDI (foreign direct investment) in the marketplace model, whereas it has been prohibited in the lucrative inventory-based activities.”
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Explaining the major difference between the two models, Kiran further said that while the inventory-model allows e-commerce firms to sell their own items, a marketplace e-commerce firm merely acts as a facilitator between a buyer and a seller.
New e-commerce policy
According to media reports, the Union Commerce Ministry has recently begun consultations with the stakeholders on the draft National e-commerce policy.
At present, there is no unified policy framework for the e-commerce sector. It has been governed by different laws and regulations across sectors such as Income Tax Act, 1961, Consumer Protection Act, 2019, Information Technology Act, 2000 and Foreign Exchange Management Act, 2000.
(Shravan Nune)
