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Indian e-commerce takes new direction

News, 06 April 2016

NEW DELHI: India's e-commerce landscape is set to change as new government rules limit the discount-driven approach which has so far prevailed, but some leading online businesses have already developed alternative strategies based on trust and convenience.

The rapid growth of e-commerce in India has been largely driven by venture capital investment which has funded the promotional offers online retailers have been using to attract customers and to undercut bricks-and-mortar retailers.

The new rules distinguish between a marketplace-based model and an inventory-based one, with any discounts, offers or inducements having to come from the seller itself and not the marketplace.

The effect is, therefore, to level the playing field between online and offline retailers. "Existing and new online commerce platforms will need to restructure their businesses accordingly," noted India Briefing.

Amazon and Flipkart, whether by accident or design, appear to be ahead of the curve, with current campaigns that focus not on price but on reassuring potential shoppers about those issues holding them back from making an online purchase – including quality, delivery and easy returns.

Many of the shoppers they are aiming at are older and in lower tier cities and rural areas, the Business Standard reported.

"While the start has been great, we feel the journey has only just begun, especially when the majority of the country is yet to experience online shopping," said Shoumyan Biswas, VP/Marketing at Flipkart.

An Amazon India spokesperson expressed a similar sentiment, saying that "the Indian e-commerce space is still at a very nascent stage with significant potential for innovation and growth".

Bricks-and-mortar retailers, meanwhile, have an opportunity to reassess their position and to invest in more innovative approaches

"The policy gives them a breather and some manoeuvring room to get customers back into stores," said Haresh Chawla, a partner at India Value Fund.

Data sourced from Business Standard, India Briefing, Mint; additional content by Warc staff