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How India’s New Draft E-Commerce Policy Can Impact E-tailers


India has been deliberating a new e-commerce policy for months. The latest draft of the policy that’s expected to be released for public consultations soon, has now stressed upon the fact that e-commerce companies should not use technology to the advantage of their preferred vendors. In that sense, the policy released by the Department for Promotion of Industry and Internal Trade (DPIIT) not only tightens regulation over the country’s growing e-commerce sector but has also cracked down on algorithms that are used by online retailers.

“E-commerce operators shall ensure that algorithms used are not biased and that no discrimination due to digitally induced biases is prevalent,” the draft said.

While homegrown players like Snapdeal, Paytm Mall have, more or less, found this to be a palatable draft, foreign and foreign-funded players like Amazon and Flipkart find it tough to digest.

E-commerce experts however believe, without a robust algorithm, a marketplace model cannot exist. Intelligent algorithms are used for segmenting customers and offering personalized experiences – and thus cannot be ignored, believes, Suhale Kapoor, EVP and Co-Founder, Absolutdata.

He mentions, “AI and behavioral data analysis can help e-commerce companies to analyze customer behavior, demand, and cost-to-serve per account.”

The more data points the algorithm is able to add, the higher is the chances of right interaction that leads to more customer retention,” says Elizabeth Gallagher, Chief Revenue Officer at Lineate.

“As more brands continue to tap into the potential that AI and ML has to offer, the more they will realize and reap the benefits of their enhanced marketing campaigns,” she said.

In recent years, the ecommerce sector witnessed widespread opposition and protests from traders’ bodies such as the Confederation of All India Traders (CAIT), who have alleged that e-commerce majors, including Amazon India and Flipkart, had found ways to flout rules and own indirect stakes in sellers while giving them preference on their platform.

A special report published by Reuters also revealed that online retailers – Amazon and Walmart’s Flipkart – have always given preferential treatment to a small group of sellers on its India platform and used them to circumvent the country’s foreign investment rules.

India’s foreign direct investment (FDI) rules under Press Note 2, 2018 barred e-commerce companies from holding direct stakes in or controlling the inventory of sellers on its platform. India is also considering changes to foreign investment rules that could prompt players including Amazon to restructure their ties with some major sellers.

In the initial draft released by the government in November 2019, FDI in e-commerce will only be allowed for the marketplace model and not for inventory-based selling. This means that Flipkart and Amazon, will not be allowed to own or sell through any of their entities.

As per the new draft policy, the government may, from time to time, notify parties that fall in the definition of associates and related parties.

Since e-commerce in India is now governed by several regulations under various ministries, the draft policy makes it clear that a ‘holistic mechanism’ will be created to prevent anyone from capitalizing on this multi-ministry setup, causing delays to issues and address grievances, it said.

A draft of the National e-commerce policy was introduced in February, 2019 and in November 2019, yet another draft on consumer protection in e-commerce also came in. The policy has already gone through multiple rounds of deliberations.

The new policy will not only apply to Amazon and Flipkart – two top e-commerce players in India – but also to domestic players like Reliance Industries, which has plans to expand its JioMart online platform.

The new draft will look into one of the major problems in the e-commerce sector – deep discounting or predatory pricing. Anti-counterfeiting measures will be also taken to curb the growing menace of fake products. Another key point is that the government’s insistence that all local data should be stored in India.

It is interesting to see what the future holds for e-tailers. India’s e-commerce growth story is resting at an exciting juncture at present. A recent report by global financial technology company FIS projected the country’s e-commerce market to grow by 84% to $111 billion by 2024 from about $60 billion in 2020. Rapid internet penetration, low cost of data and smartphone access has led to an increased adoption of e-commerce in India, a trend that will continue as more sellers and consumers come online.

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Sohini Bagchi
Sohini Bagchi is Editor at CXOToday, a published author and a storyteller. She can be reached at [email protected]