Is this the end of the road for the e-commerce juggernaut?

In today's Finshots we talk about the new amendments to the E-Commerce Rules, 2020

The Story

Right off the bat, we have to tell you that these amendments haven’t been notified yet. The government is seeking additional comments from industry stakeholders and we will have full clarity on the laws only after the formal consultations conclude. But in the meantime, we can still look at the rules and see the kind of impact it may have on e-commerce entities.

So let’s start with the most contentious rules first.

A ban on flash sales — the kind that has gained prominence over the years. So if you’re organizing a sale at significantly reduced prices for a brief duration with the sole intention of drawing a large crowd, then you may no longer be able to do so anymore. But here’s the thing — Soon after the amendments were published, the government clarified that this won’t apply to conventional flash sales.

What does that mean?

Nobody knows for sure. But the general consensus seems to be that this rule will only be applied to sale offers that limit consumer choice and is “fraudulent” in nature. Although one has to wait and see, what this really really means and how this may affect the normal course of business for most e-commerce websites.

Then there was the bit about cross-selling.

E-commerce companies routinely cross-sell products based on your purchase pattern. If you’ve bought a PlayStation, they’ll probably nudge you to buy an extra controller the next time you visit the website. And while this is a practice that’s all-pervasive in every industry imaginable, the new amendments require e-commerce companies to disclose the “name of the entity providing data for cross-selling”. Once again the wording is a bit vague here and we have absolutely no idea how this will play in real life.

Bottom line — Some rules are really hard to interpret and even industry experts can’t seem to get a grip on all of the amendments.

But there are rules that are easy to read and are clearly intended to achieve a specific objective. For instance, the rule on foreign goods. Last year, the government-mandated e-commerce platforms to list the details of importers if said goods are sold on the website. However, the government now wants to take it a step further. They want e-commerce entities to offer a filter by which consumers can select goods based on the country of origin. And they also want them to suggest desi alternatives when imported goods are being sold.

This is clearly a push for Made in India products.

And there's also no ambiguity on certain rules intended to level the playing field. E-commerce companies routinely get away with some really shoddy stuff. They often tweak search results in a bid to showcase products that their related entities market. They use data from third-party sellers to launch their own competing products. And they sometimes abuse their dominant position by limiting access to sellers or discriminating between them. All of which is a no-no if we’re talking about a strict interpretation of the new amendments. So that’s definitely a step in the right direction.

But there are also rules that industry experts believe might be a bit too harsh. For instance, the inclusion of fallback liability. If a seller were to fail to fulfill their obligations to a customer then the ultimate responsibility will hinge on the e-commerce company. They will be held liable if a seller fails to deliver a product.

But perhaps the most controversial item on the agenda is the scope of the new amendments itself. As Praveen Gopal Krishnan (from The Ken) put it best while covering India’s approach to e-commerce —

India’s new e-commerce rules apply to everyone.

Yes. It applies to “all models of e-commerce”. Marketplace. Inventory. Single brand. Multi-Brand. One channel. Multi-channel. Everyone. If you are a tiny bakery in Bengaluru’s Indiranagar, and you have a Shopify website where someone can place an order, congratulations, India’s new e-commerce rules apply to you. Thanks to this definition, the laws even apply to companies in adjacent businesses like Swiggy and Zomato, which are involved in food delivery.

So while the rules are intended to level the playing field and offer consumers a better bargain, there is still some concern on how they may affect important stakeholders in the industry.

In any case, we will have to wait and see how the final draft looks like.

Until then…

Don't forget to share this article on WhatsApp, LinkedIn and Twitter