100 percent FDI in E commerce - what it means to retail business?
E-commerce is a booming business and was projected to grow to 38bn $ in 2016. There is tremendous business and growth potential in this sector. Therefore, it is likely to attract regulator and government attention. Many states have already levied some kind of duty upon it. Parallel to this runs the story of brick and mortar shops. In India every nook and corner has a brick and mortar shop known as 'Kirana' . This Kirana shops adds up to a huge number both numerically and economically. A large number of Indian populations depend upon these shops for livelihood. E-commerce with huge investments available at their disposal forms a kind of threat to the livelihood of these peoples.
Before getting into threat analysis we must understand the business model of E-commerce websites. E-commerce business model works in two types, namely, B2B (Business to Business) and B2C (Business to Consumer). B2B model chiefly caters to the needs of businesses. It connects two businesses. The needs of one business are fulfilled by another business. Common example is www.alibaba.com. B2C model chiefly caters to the needs of consumers. It connects between Business and consumers. Common example is www.flipkart.com. B2B model works only for bulk orders while B2C model works for retail orders. Government has now only allowed 100% FDI in B2B model of E-commerce. FDI of B2C model is not yet have been relaxed. This will lead to inflow of foreign websites and businesses into India. But, they cannot sell directly to the consumers. They have to sell to the business houses in bulk. This is a win-win situation for all. This policy will bring variety of choices into the hands of 'Kirana' Shops. They will get more discounts. Moreover, this will lead to end of monopoly.
The Government policy of allowing 100% FDI in Ecommerce will have an impact on retail business positively.
Low prices and Discounts
The retail business will have the option of comparing prices from varieties of sources. This will lead to drop in prices as competition from various companies will increase. Ultimately, retail business will flourish.
Varieties of Options
The retail business will get varieties of options. The foreign businesses will flock the Indian market. As such the options of choosing will also increase.
No Geographic Barrier
With the advent of more websites the geographic distances will shorten. By sitting in one's home one can order commodities from anywhere. The orders could be delivered through courier in anywhere of India.
Increase in Business
Retail business can increase their business by tying up with this B2B e commerce websites. Retail businesses can sell their products in those websites. This will increase their products reach to billions of people around the world. Indian handicraft and traditional sector will gain immensely from these websites.
Overall impact of opening up of e commerce sector for retail business in India will be tremendous. Retail business in India, which now depends only on their locality for income, will have the power of internet in their hands. If utilized properly and carefully the retail business in India will flourish. The GDP of India will get a boost and livelihood of those 'Kirana' shops will increase.
- Mrinal Malakar
