Author: Renita Jane Pinto | Marketing Specialist | Maier+Vidorno
First published in April 2017
India is the fastest growing in the retail e-commerce market worldwide and is projected to top $64 billion by 2021. With a dynamically growing economy, a total population over 1.3 billion and 860 million people of working age, India is one of the most attractive markets worldwide. India’s business to business (B2B) e-commerce market on the other hand is expected to reach $ 700 billion by 2020.
The convenience of purchasing online is driving more consumers to the internet and close to 240 million people are forecast to buy goods and services online in India by 2019. Whatever your product is, you have potential customers in India and an e-commerce platform can help you tap additional market share in the most efficient way. However, there are some legal restrictions for foreign companies selling online in India, and it’s important to understand them before investing.
Indian regulations distinguish between two different models:
- Market Place Model: Market places like AMAZON or FLIPKART work as facilitators of e‐commerce providing a platform for business transactions between buyers and sellers. The “Market Place” itself can be owned by a foreign company (100% FDI), but any foreign “Market Place” owner can only make money from brokerage/service fees and not from margins earned while buying and selling products. Foreign companies are not allowed to directly sell products on that Market Place.
- Inventory Based Model: This is the term used when companies sell their products directly online – either through their own web-portal or by utilizing other web-portals. Companies with a majority foreign shareholding (+50% FDI) are not permitted to sell in India using an inventory model – Irrespective of whether business transactions are Business to Business (B2B) or Business to Consumer (B2C).
What this all means is that the only way for a foreign company to participate in the fast growing Indian e-commerce world is by partnering with an Indian company (e.g. working with an importer, distributor, or going into a Joint Venture with minority foreign shareholding). The Indian partner will then display the products on web-portals, invoice the product to the buyer and collect payments.
This isn’t ideal for all foreign companies because working with dealers, distributors or other partners can reduce transparency in general and especially in topics such as pricing, customer care and after sales service.
Maier+Vidorno is the only company that provides a 360° solution to foreign businesses wanting to enter and expand in the Indian market. We ensure the best solutions for your investments in India in a 100% legally compliant manner.
M+V has developed practical business solutions for foreign companies to trade online while still complying with Indian Regulations and remaining in control.
Why work with M+V?
- Almost 20 years of experience supporting foreign companies to do business in India
- Hands-on experience in managing complete operations for foreign companies in India
- Expertise across 15+ industries in India
- Handle 100+ different product categories
- Throughput of over $5 billion per annum
To know more about your options to sell in India through the e-commerce platform, contact us!