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'Consumers Buying Online Has Now Become A Reality'
It's impossible to regulate the level of discounts by any one government agency unless very clear benchmarks and caps and floors are set, says Ronnie Screwvala
Photo Credit : BW Archives
It’s not that conventional retail does not give discounts. They are scheme based and sometime cross even 50 per cent when it comes to clearance sales and more, says UTV Group founder, media entrepreneur and angel investor Ronnie Screwvala in the wake of government’s opening up of FDI in online retail. It's impossible to regulate the level of discounts by any one government agency unless very clear benchmarks and caps and floors are set, he says in an email interview to BW Businessworld.
What is the impact on the burgeoning online retail market going forward? Do you think there are any loopholes that still need to be addressed?
The spirit of this clarification by the government is to propel e-commerce growth. Consumers buying online has now become a reality. Do not think five years back we would have thought Indian consumers - whose mindset is not trusting of quality and wanting to touch and feel - would have bought furniture or fashion online but they are. Also for all the sharp rhetoric from conventional retail, fair from their point of view, the Indian consumer has benefited tremendously and has also expanded our Consumption story and allowed access to products to a cross section of people who would not otherwise have bought on impulse. However - like always - the Government must ensure clarity on all they have announced and like most of our laws there is so much open to interpretation. The endeavor has to be black and white and not keep any loopholes open. To that the Press Note has to have sharper language than the clarifications announced - as presently many are already making this open to interpretation.
While 100% FDI is permitted through the automatic route, the government also specifies that foreign investment will not be allowed in inventory based model of e-commerce. Your views
Each country has to frame rules that are relevant for its market place yet keeping in mind that it's a global marketplace. Media gives too much undue importance to what global companies think India should or should not be doing.
The guidelines also specify that online retail ventures will not be able to influence the sale price of goods and services which means, they will not be able to dole out heavy discounts any more. What are the implication going forward? Will valuations be impacted?
Let's be clear this is a very open ended clause and totally set for MIS interpretation. On one side - it's not that conventional retail does not give discounts. They are scheme based and sometime cross even 50 per cent when it comes to clearance sales and more. It's impossible to regulate the level of discounts by any one government agency unless very clear benchmarks and caps and floors are set. I am not sure how a level playing field can be set here unless the rules are well articulated and for all retail. On the other hand one can argue that finally it's the consumer that is benefiting with very competitive rates and like in Telecom, which exploded as there was no base price on charge per minute , one would need to understand the long term thinking behind this clarification. There is no doubt that some e-commerce firms took discounting to the next level and did raise a lot of shackles and a few Global PE/hedge investors literally paid for Indian consuming more products right through 2013 - 2015 ....but now having a knee jerk regulation to restrict this, when water would have anyway found its own level - may not be productive - aside from the fact that this needs very clear articulated benchmarks as to what is level of discount. Valuations are always - like beauty , in the eyes of a few beholders and so that will always have its fair share of ups and downs - but the next two years will anyway separate the men from the boys and in the long term there is still a lot more value to be created for the smart and the wise.