The last decade has been witness to how internet penetration has transformed the face of consumer-based business models in India, leading to lifestyle changes and changing consumer behavior patterns.

‘E-commerce’ is believed to have been one of the driving factors, by supporting an entire ecosystem of allied business models around logistics, cash management, payment systems, inventory management, et al. However, the challenges in the sector have also been manifold. Encapsulated below are some of the checkpoints for entering and navigating across the Indian e-commerce ecosystem today.

Data Ownership and Data Localization:

The draft National e-commerce Policy issued by the Department for Promotion of Industry and Internal Trade (“DPIIT”) on February 23, 2019 brings in the concept of sovereign right to data with a potential system of compulsory licensing or even spectrum selling. Limiting early-stage corporations from gaining data-driven market advantages and restricting the choice of consumer consent are some of the dissenting notes on this. Data localization is another focus point of the draft policy, which has faced flak from international communities such as the US Trade Representatives, on the ground that it is discriminatory and will add on to the entry-barriers for data-intensive services.

Exclusive Deals, Deep Discounts and Private Labels:

The Government seems to have taken note of the dual competitive strategy of price control (through discounting/cashbacks) and inventory control (through exclusivity and indirect inventory holding). With an overall note of bringing in fairness and non-discriminatory treatment, the Government has imposed additional conditionalities on e-commerce entities having foreign direct investment (“FDI”) through Press Note No. 2 of 2018, issued by the DPIIT on December 26, 2018. E-commerce entities are now, inter-alia, prohibited from entering exclusive deals or exercising any kind of ownership or control over inventory or directly or indirectly influencing price points. Dampened interest with respect to foreign capital infusion and entry of new foreign players are some of the concerns here. If e-commerce 2.0 is what the country is aiming for, with broad-based digital inclusion and last mile delivery at its very core, it remains to be seen how the domestic investor base responds to this opportunity for gaining market share.

M&A and Consolidations:

Driven by factors such as growing capital requirements, access to newer consumer base, consolidation of allied strengths have become surviving strategies for many players in the ecosystem. One can safely say that the market is now evolving and progressing towards finding the right operational as well as sectoral synergies. However, how the Competition Commission of India reacts to such trends remains to be seen.