What Every E-commerce Business Owner Should Know about FDI?

E-commerce Business

In the year 2016, the Government of India allowed about a hundred percent FDI one and only for the goods and services. In the traditional days, e-commerce was only allowed in the B2N type of businesses.  It indirectly means that supplying of the raw materials undertakes the overall sale and the entire story of the e-commerce was intersected by the new startups. The enhancement inflow of foreign investment takes place in a unique manner.

What are the e-commerce entities?

Generally, an e-commerce term means both of buying and selling the goods and the services included in both of the digital and the electronic network. Here, it clarifies the different forms of e-commerce platforms which include computers, television channels, and mobiles etc. The Indian companies, foreign companies, and the other branches are included and it is also controlled by the non-residents.

It is totally clear now that the foreign organizations can invest in the market-based e-commerce and it also enables the foreign investors to acquire the overall Indian entities operating marketplaces. There are some of the operating conditions particularly for the e-commerce entities along with the FDI. For the company registration process, the collection of the marketplace based e-commerce retailing process takes place.

#1 Role of Inventory-based and marketplace based models

It is important to know the major differences between the marketplace based and the inventory-based. According to the FDI policy, there are no constraints in seeking the investments mainly for the e-commerce marketplace model. On the other side of the coin, the inventory based model is a regulated one. There is no scope especially for the foreign investment and generally, in a marketplace model, both the buyers and the sellers can get a platform for the interaction process.

At the same time, it also provides important services such as the packaging, shipping including the delivery. The e-commerce platforms such as the Amazon and the Flip kart do not have any goods of their own and they offer lists of the sellers to a huge number of customers. Whereas, in an inventory based model, the organizations own all the goods and also they take care of the entire process starting from the procurement of goods to the actual delivery.

Typically, a marketplace is a highly scalable one and it includes a list of goods and an inventory based model has a great control and access to derive the huge profit margins. A hybrid model is a one which includes the combination of the inventory and the market traits.

#2 Online Retailing- Policy of Warranties and guarantees

According to the FDI policy, the e-commerce company operates in the marketplace model and they do not provide any responsibility for warranty. Both the warranty and the guarantee of the services are sold in the online and they are endured by the sellers. It automatically means while involved in the setup process of the online retail company, the contracts include the obligations on the sellers.

#3 Manufacturing Entities

Then coming to the point of the manufacturing entities, the FDI policy exclaims that a manufacturer will be permitted to sell all the products which are manufactured in the retail or online through the way of e-commerce without any government approval. Under the concern of the automatic route, the manufacturing entities sell the products subjected to the e-commerce retail.

#4 Single-brand retail Trade

A recent report exclaims that the government has permitted hundred percent FDI under the automatic route in the different entities. These are more or less engaged in the single brand retail trading process. It has a greater potential of enhancing the supply chain and also there is a great access for the brands which limits the three major factors such as the time, cost and the filing process. The highlighted fact is that the foreign entities are trying to enter the Indian market at any time.

#5 Multi-brand Retail Trading Business

A clear forbiddance is given for the multi-brand retail trade and the major concept is that selling of the bouquet of brands is a little controversial one. Both the states and the union territories have the rights to choose the implementation of the prohibition process or not and the government is moved towards the developing retailers.