FDI IN E-COMMERCE

Presented byAman Verma

Aviral Rastogi
Abhishek Kataruka
Tansiha Verma
Vamika Andotra
Khateeb Ullah Chaudhary

FOREIGN DIRECT
INVESTMENT
Investments made by a company or an entity based in
one country, into a company or entity based in
another country.
There are two types of FDI: Horizontal FDI
Vertical FDI

E-COMMERCE
Process of buying, selling, transferring or exchanging
products, services and information via electronics and
communication.

GUIDELINES FOR FDI IN ECOMMERCE SECTOR

Government announced rules for FDI in online retail
firm to attract more foreign investment.
DIPP(Department of Industrial policy and promotion)
has outlined the definition of e commerce as Inventory
based model and Market place model.
Foreign investors can now own 100%in e commerce firms
which follow Market place model
FDI is not permitted in inventory based model

GUIDELINES
Indian manufacturer is permitted to sell its own single
brand products through e commerce retail.
E commerce entity providing a marketplace will not
exercise ownership over the inventory.
E commerce entities providing marketplace will not
directly or indirectly influence the sale price of the goods

CONDITIONS
E-commerce marketplace provides support services to
sellers in respect of warehousing, logistics and other
services.
In marketplace model, payment for sale is facilitated by
e-commerce entity in conformity with RBI guidelines.
In market place model,any warrantee/guarantee of goods
and services sold will be the responsilbility of the seller.

Market PLACE MODEL

Market place model of E commerce means providing of
an information technology platform by an E commerce
entity on a digital and electronic network to act as a
facilitator between buyer and seller.

Example
Amazon India: Launched its site by 2013
Registered electronic goods sellers and offered
nearly 15 million products in FY 2013.
It has set up a logistic arm named Amazon
Logistics and started same day delivery.

INVENTORY BASED MODEL

An E commerce activity where inventory of goods and

services is owned by E commerce entity and is sold to the
consumers directly

EXAMPLE
FLIPKART : Started with a consignment model and later turned into
inventory e retailer supported by registered suppliers.
Facing difficulties like high delivery cost , late
deliveries , faulty products , customer dissatisfaction , it
has started its own logistics arm named e-Kart.

IMPACT ON CUSTOMERS

Discount only by vendors : Era of discounts is over

Restriction of 25 percent of the total sales on Market

Place firms.

IMPACT ON BRICK AND

MORTAR MODEL
What is Brick and Mortar
Model?

IMPACT ON BRICK AND MORTAR MODEL

Attracts more customers

Increase in sales
Increase in profitability

IMPACT ON THE VALUATION OF

E-COMMERCE FIRMS
The valuations could shrink.
The firms will no longer be able to show huge growth in
revenues.
The profitability will recover as heavy discounts end, and
that should improve investor perception about these
companies, and subsequently valuations.

IMPACT ON REAL ESTATE

SECTOR
India is host to some of the largest global ecommerce
players.
100% allowance in FDI will open doors to a host of other
players in this segment
New players will require large office spaces to house
their back end teams.
We shall witness a significant step up in demand for ware
housing spaces in and around the cities in India.

GLOBAL E-COMMERCE MARKET

Globally, the electronic commerce market is worth
$22.1 trillion.
China is worlds largest business to consumer ecommerce market, both in terms of sales and number
of online shoppers , followed by US and Japan.
India, the 10th largest market in terms of buyers , was
ahead of Brazil and Russia in per capita ecommerce
expenditure.

CURRENT SCENARIO OF FDI IN

INDIA

The government allowed 100% FDI in Business to

Business(B2B) E-commerce but not in retail ecommerce
that is Business to Consumers(B2C).

Flipkarts largest seller WS Retail Services Pvt. Ltd easily

generates more than 25% of the companys sales while
Cloudtail India Pvt. Ltd, the biggest seller on Amazon
India, contributes even more.

Flipkart has been gradually reducing WS Retails business

over the past 15 months as it shifts to a marketplace
model. Following the new regulations, Flipkart may have to
accelerate its transition.

FUTURE PROSPECTS
E commerce

market is

Presently valued at $25 billion

Growing annually at 35-40 percent per year.

Expected to cross $100 billion mark in five years.