The government of India is focusing on taking out rules and regulations for the fast growing eCommerce Industry in the country. There has been a lot of debate regarding FDI investment in eCommerce. To solve the confusion, we have complied and explained the current eCommerce FDI laws in India based on FDI Circular 2014 – by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India
FDI laws for B2B eCommerce
Currently, India permits 100% FDI in B2B e-commerce activities! Companies such as Walmart are actively engaging their B2B registered merchants to do bulk ordering on their eCommerce portal. In B2B eCommerce, trading is between business entities such as manufacturers and wholesalers or between wholesalers and retailers.
FDI in Single Brand and Multi Brand B2C eCommerce
The FDI policy provides that retail trading, in any form, by means of eCommerce, would not be permissible for companies with FDI and engaged in the activity of single brand retail trading or multi-brand retail trading.
How to tackle this
Most of the large brands have embraced a solution, which is under the rule book – distributor (franchise) model.In this model, the foreign brands can run an eCommerce store for consumers. They can build the store according to their brand guideline, design promotions, manage merchandizing etc. However, they need to engage one of their distributors to do order fulfilment, process and bill all the online orders. In this model, ownership of inventory vests with the distributor (who is also the ultimate seller). This is compliant with the FDI policy of India as the online business entity providing the eCommerce platform does not involve itself in any retail transaction or any direct sale to the consumer!
Case Studies for FDI in B2C eCommerce
Samsung India runs an eCommerce store. However, all online orders on the Samsung India eCommerce Store are being executed (fulfilled, billed) by Savex computers limited, a national distributor for Samsung India Electronics Private Limited. More about it in this link. Adidas India runs India focussed eCommerce Store. However, all the online orders on the online store is fulfilled and billed by Adi Sports Pvt Limited who is a distributor and dealer of Adidas India.