Until now, India has had a strict ban on who could sell products online in their country. The FDI (Foreign Direct Investment) prohibited companies who manufactured products in India from selling via ecommerce platforms- companies like Nike and Puma. Non-Indian companies could only operate as marketplaces for Indian-based goods. Soon though, this may all change.
Narendra Modi, India’s new Prime Minister, has expressed that he would like to open India to foreign businesses. This includes the ecommerce sector, which currently is a booming 13 billion dollar industry in India. The proposal to lift the ban on FDI was presented by Finance Minister Arun Jaitley. It’s proposition to relax FDI rules for manufactured goods by foreign retailers is expected to help the ecommerce industry expand.
As the second most populous country in the world, the potential for ecommerce to take off is formidable. Chinese mega-giant Alibaba is already investing in Indian ecommerce companies, and sites such as Rakuten, Walmart, and Amazon all want in. This move could result in threatening competition for Indian based marketplaces Flipkart and Snapdeal.
Flipkart, India’s largest ecommerce company (according to revenue numbers), had originally modeled its business off of Amazon’s popular marketplace. It began as a marketplace for just books, but later moved into selling apparel, electronics and its own branded goods. Unlike Amazon, who has 25 million online retailers selling products on its international marketplaces, Flipkart has only 3,000 sellers. Not surprisingly, Flipkart adamantly opposes the lift of the ban. It leads us to believe they fear that Amazon could take its business once lifted.
At this point, it’s hard to predict what exactly proposed opening of India’s market could mean for U.S. based retailers selling on Amazon, Rakuten, and Walmart. One thing’s for certain- if the greatest powers in ecommerce are lining up to get in, you definitely don’t want to be left out.