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Title:Retail push: Govt takes baby steps towards FDI in e-commerce

News Paper

NEW DELHI: The government on Tuesday allowed single-brand retailers such as Marks & Spencer and Adidas to directly enter the online retail segment, while also creating a platform for "Indian manufacturers" such as Fabindia and Hidesign to boost their e-commerce business- moves that were seen as limited opening of business-to-consumer (B2C) e-commerce for overseas investors.

Companies such as Fabindia, which have overseas equity, were unclear if they could sell products such as organic food online and the government's statement seeks to provide clarity. "A seamless integration between brick-and-mortar and e-commerce is the future of retail," Fabindia MD William Bissel told TOI.

Similarly, single-brand retailers can now sell online without specific permissions. Earlier, the FDI policy for single-brand retail trading (SBRT) did not allow these companies to sell online on their own. As a result, most of them adopted a franchisee model and partnered with online marketplaces such as Flipkart and Snapdeal to sell their goods. Industry experts said single-brand retailers will now wield more control over the ongoing online discounting war since they will not have to depend only on franchises for online sales. "It is a positive step to boost the growth of e-commerce in India. We will study the fine print of this before we can comment on the next steps for Adidas and Reebok," said Dave Thomas, MD, Adidas Group India. Last week, the German sporting goods maker got the government nod to operate fully-owned stores in the country.

Similarly, in what may have come as a relief to Swedish furniture chain IKEA, which is looking to open its first store in Hyderabad in 2017, the government has tweaked the start date for the 30% mandatory local sourcing rule.

Existing rules required companies to meet sourcing norms from the date of receipt of FDI. Now, they can do so from the time they open their first store, which means more time. Interestingly, IKEA CEO Peter Agnefjall had met Prime Minister Narendra Modi last week to request more time to meet the local sourcing norms. "To start counting the time to comply with the 30% local sourcing norm from store opening will support brands in building long term sustainable supply chains that are good for India, good for the businesses and will enable better prices to the Indian customers," said an IKEA India spokesperson.

Venu Nair, MD of Marks & Spencer India, said the government's new stance could turn out to be a significant opportunity for the UK-based retailer of clothing and home products to grow its business here. The company that recently partnered with online marketplace Flipkart to sell its products, operates around 50 brick-and-mortar stores in the country. "The relaxing of norms could enthuse many MNCs to enter India. They can open a few physical stores with minimum investment and build a strong online presence to do business here," said Arvind Singhal, retail expert and founder of retail consultancy Technopak.