How GOI messed up #DigitalIndia

The new guidelines for FDI on E-commerce have been published by the DIPP and it is anything but Digital-India-friendly. Here are some key observations:

Disclaimer: These opinions are based on my interpretations. If the guidelines are clarified, some of these concerns may not be relevant.

  1. Inventory-based model is not allowed — While this may have been introduced to encourage marketplaces to act only as aggregators of sellers, what this does is reduce efficency. A marketplace is a treasure trove of data. This can be used to make the turnaround time minimal if the right inventory is stocked.
  2. Post-sales support — The guidelines make it clear that the post-sales support is the sole responsibility of the seller. While this may seem like a good thing from a marketplace’s eyes, it absolutely sucks for a cosnumer. What you’re essentially saying is that irrespective of whether I buy a faulty product from a local brick and mortar store or from Amazon, my complaints go unheard and need not be answered by Amazon. My Twitter timeline may be less cluttered but this is blatantly encouraging zero value add. While it is not clear if this holds good for services marketplaces, if it is so…this makes every services marketplace you can think of another justdial. An online version of Yellow pages.
  3. Clear contact details of vendors — This point is part of the same guideline as the above one. This effectively turns every services marketplace into a justdial clone for different categories. Of course there are ways to circumvent this, but why must entrepreneurs waste time finding loopholes when providing value and making money should be the primary focus of every business? The value most service markteplaces add lies in being the single point of contact between the consumer and seller. In a country where educating a customer about the friction that can be avoided by using technology is already hard work, having such regulations makes everyone’s lives worse.
  4. No involvement in setting price — Many have pointed out that this implies no discounts via a marketplace. Let me show you another major flaw in such a guideline. If a marketplace doesn’t get involved in pricing, it becomes a vendor’s game. An aggreagtor’s job is to make sure a consumer isn’t hoodwinked by a vendor. There are several tools a marketplace can employ to ensure a customer gets the best possible deal. This rule makes it seem like even a harmless process like a reverse auction (multiple vendors bidding for a customer’s order) cannot be conducted.

While these may seem to reduce the accountability of a marketplace, everyone involved in the process pays a heavy price. India is a country where people are innocent until proven guilty. The father of our nation said pardoning 100 criminals is better than convicting one innocent person. I know not if the DIPP made these guidelines to punish a few large players who were taking an advantage of the system or to benefit low-tech, unorganized retailers. Either way, it looks like our PM’s ‘Minimum government, maximum governance’ motto is something his government needs to be reminded of.