The new rules on foreign direct investment in online marketplaces could accelerate the entry of overseas firms such as China’s Alibaba Group, both as investors and retailers, and potentially alter India’s e-commerce landscape given their deep pockets.
According to a report in The Economic Times: The guidelines permitting 100 per cent FDI in the “marketplace” model and disallowing foreign investment in the “inventory” model give e-commerce firms like China’s Baidu and Tencent and Japanese Internet giants like Rakuten and Recruit Holdings clarity on investing in Indian e-commerce by removing much of the policy-related ambiguity that existed until now, say experts.
“The policy will bring in more interest from investors who have not yet entered the (Indian) market from countries like China and Japan as the fear of working through loopholes is now gone,” Senior Analyst with Forrester Research, Satish Meena was quoted by The Economic Times as saying,
“We anticipate more players will enter India but more in the fashion and lifestyle categories,” said Chief Business Officer at Shopclues, Radhika Aggarwal, was quoted by The Economic Times as saying. The new rules “opens the doors for more international players including Tao Bao to enter India.”
The Chinese e-commerce behemoth is planning to enter India this year and for a possible partnership, it has approached Tata Sons. It will take two quarters for Alibaba to finalise a joint venture partner.
The company said it is evaluating all opportunities to build the business organically or look at any other thing that might come along.
The latest guidelines are expected to offset a potential two-horse race between Flipkart and Amazon in India, adding pressure on them even as they may have to restructure their operations to comply with the new rules.