FOREIGN DIRECT INVESTMENT – FDI IN E-COMMERCE

E-commerce doesn’t need an introduction. For some of us, it has become an indispensable part of our lives. It has made the lives of people, especially for the working class somewhat easier and smoother.  According to the Economist Intelligence Unit, Asia is about to surpass North America to become the largest E-commerce market this year.

FOREIGN DIRECT INVESTMENT IN BUSINESS TO BUSINESS (B2B) ECOMMERCE:

WHAT IS B2B E COMMERCE?

On the internet, B2B ECOMMERCE is the exchange of products, services, information between businesses rather than businesses and consumers. Some of the examples for B2B ECOMMERCE websites are QUILL.COM, GRAINGER.COM, FLIPKART.COM, JABONG.COM etc.

The government allows 100% FDI in B2B ECOMMERCE.

ADVANTAGE OF B2B ECOMMERCE:

Customers in B2B commerce are more loyal than customers from B2C sector. Since business customers are committed to you as the supplier longer through contracts and individual agreements. It leads to lower acquisition costs and long-lasting customer relations.

FOREIGN DIRECT INVESTMENT IN BUSINESS TO CONSUMER (B2C) ECOMMERCE:

WHAT IS B2C ECOMMERCE?

On the internet, B2C ECOMMERCE is a financial transaction or online sale between a business and a consumer.  

DIFFERENCE BETWEEN B2B AND B2C ECOMMERCE:

Any B2B operation has 100% FDI but it cannot legally sell directly to consumers, for that it requires B2C.
Now here B2B is FLIPKART and WS Retail is B2C, so FLIPKART cannot sell product directly to you. This is not only for FLIPKART for all online shopping website that sell product by B2B Market. You can easily identify this, when you shop something online see on the packing box, you find name of the other company. Suppose you buy something from FLIPKART you get packing box from Ws retail.
This is a list of websites that have B2B and B2C entity.
                                    B2B Entity                              B2C Entity
• FlipKart.com     :  Flipkart online service           Ws Retail
• Myntra.com     :   Myntra designs                       Vector E-Commerce
• Jabong.com      :  JADE ESERVICES                       Xerion Retail
• Snapdeal.com  :  JASPER Infotech                       Spinel trade.com
• Yebhi.com         :   Big Shoe Bazar                        Shop online trading
• Yepme.com       :  VAS Data Services                   Growth trading

Amazon has asked 49% FDI in B2C ECOMMERCE, hence allowing it to sell directly to the consumers. Amazon which has invested $300 million in India says that allowing FDI only in B2B E-commerce restricts investments and local sourcing from manufacturers.

But for now India will not allow B2C E-commerce in order to safeguard the interests of Indian ventures such as FLIPKART, SNAPDEAL etc. According to Mr. Amitabh Kant, secretary at the department of industrial policy and promotion (DIPP), If FDI is allowed in B2C today, Indian ventures like FLIPKART will be finished.

The Indian government in its recent Union Budget 2014, has allowed foreign retailers, who manufacture products in the country to sell via E-commerce platform, thus benefiting the local units of retailers such as MARKS AND SPENCER, PUMA etc. Hence, liberalizing foreign investment in the country’s E-commerce sector.

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