Last month Morgan and Stanely marked down the valuation of Flipkart by 27%. Now this could further shrink after DIPP announcement not only with Flipkart almost with all the leading E-commerce players in India.
Announcement of 100% FDI direct investment in E-commerce from Indian government indirectly tightening the screw of the E-commerce sector to regularize them by announcing the discount should be offered by the Seller to buyer in Market place model and not to exceed more than 25% of the overall sales by an individual vendor or a group of company in market place model.
Basically market place model is providing IT platform to act as mediator between Seller and Buyer which was followed by 90% of the Ecommerce sites. Now this is major challenge for Indian E-commerce giants like Flipkart and Amazon operating in market place model for attracting more customers by offering hefty discounts. Flipkart moved to market place model in 2013 by moving his warehouse arm to WSretail. Technically WS retails is the subsidiary of Flipkart. WSretails contributing 75% of the flipkart sales and the situation now for flipkart is adhere the norms by reducing it to 25%. The same story with Amazon, contribution of cloudtail sales need to reduce from 40% to 25%
However, snapdeal foresee this long back and diversified their vendor in all the sector which helped them a lot now to focus on adding value to their business rather than running behind the government norms.
Definitely these ecommerce retailers will come up with a plan to face this challenge. Meanwhile the brick and mortar retailers are quite happy with the norms and looking forward some restriction to boost their business in mean.
No more big billion days, festive week, discount hours which will make customers to move to brick and mortar retailers to avail discount in the traditional way.