India does not allow foreign direct investment (FDI) in any business-to-consumer, or B2C, ecommerce companies. Foreign-funded companies, including Amazon and homegrown giants Flipkart and Snapdeal, are operating as marketplaces, whereby they merely lend their technology platform for Indian vendors to sell.
Small retailers are disputing this and have sought a probe against ecommerce firms under the Foreign Exchange Management Act. “We are saying this ecommerce is destroying us. We are saying that if a pair of chap . 100, these ecommerce pal is for ` companies are selling it for ` . 80,“ said the person quoted earlier. He alleged that the `. 20 is being subsidised by the online retailers using foreign capital.
Snapdeal and Flipkart declined to comment on the development. Amazon India did not respond to ET queries.
Shoes as a category is a huge repertoire for ecommerce companies in India and is among the top five sellers for general ecommerce companies, including Flipkart and Snapdeal. This is the second lawsuit in three months against the ecommerce business, which has gained rapid popularity across the country helped by unprecedented discounting.
In May, top brick and-mortar retailers had dragged the central government to court, demanding level playing field in FDI norms vis a vis ecommerce players. Retailers Association of India, which represents top retailers such as Future Group, Shoppers Stop and Reliance Retail, had accused the e-commerce companies of “circumventing“ FDI laws by calling themselves marketplaces.
Offline retailers, ranging from large branded store operators to small traders, accuse ecommerce companies of using the marketplace model as an eyewash to indulge in actual retailing themselves.