Saturday, 22 September 2012

Fine Print of GOI FDI in Multibrand Retail Notification

Yesterday Government of India notified the FDI in multi brand retail. One of the finer prints which was also being reported yesterday and today is that this notification does not apply to eCommerce businesses.  E-Commerce businesses were not permitted to have FDI and that policy remains in effect. The curious implication of this policy is that while Walmart can do business in India, Amazon its upcoming competitor in the US and rest of the world cannot operate in India. It makes me wonder if all the benefit of technological innovation that is being suggested Walmart like businesses are going to bring to India, can't Amazon do the same, or may be, better. When we are opening up retail then why not online retail? What is the justification for not allowing FDI in retail eCommerce?

Interestingly this came at the back of another news story, that Walmart has stopped selling Amazon's Kindle eReader devices which it sees as a competitor. Another interesting article in Washington Post is here.
The article states "Retailers have been particularly critical of the online marketplace and its contribution to the trend of “showrooming.” They complain that customers often come into their brick-and-mortar stores to see or try out products that they’re interested in buying, only to leave and purchase the goods online, where customers often don’t have to pay sales taxes. That practice gives online retailers an unfair advantage..".

Now I am not alleging a conspiracy in keeping out Amazon and allowing Walmart in India, at least not yet. But this presents a curious case of a retailing giant like Walmart which is the biggest company in the history of the world being allowed to operate freely in India and not allowing its online competitors which Walmart and Target feel threatened by, and hence are trying to limit them desperately. Some have stated that the only company which ever was as big and powerful in the history of the world as Wal-Mart is today was, The British East India Company. An interesting article on the Boston tea Party protest against the British in America in 1773 is here which uses the Wal-Mart analogy to, I must say, a great effect.

Here is an interesting book on Wal-Mart's business practices. The link opens an amazon book retail page in the US. Lets see where this takes us, we are nothing but witness to history as it unfolds. Can our actions influence it?

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