Commercial real estate comprising of shops, showrooms and malls can get a leg up with the recent changes in the ecommerce policy brought in by the government which has the effect of restricting deep discounts offered by online players and other sops given by them.
For long, the physical retail store owners in the country were complaining that the ecommerce companies were taking away a huge pie of their business by offering unreasonable discounts and additionally offering cash back. However, the government announced massive changes to the e-commerce policy in December 2018 which has changed the way ecommerce players have been conducting their business in India.
Changes In The Ecommerce Policy
Under the new policy, the government mandated that e-commerce players cannot buy over 25 percent from a single vendor. The policy also mandated that ecommerce companies cannot give discounts on products, neither directly nor indirectly. The government also stipulated that companies in which there is equity stake by the online player, cannot sell their products on online player’s platform. Another feature of the new ecommerce policy was that the e-commerce company will not mandate any merchant to sell any product exclusively on its online platform. The new policy also stipulated that marketplaces will have to submit a compliance report to the RBI (Reserve Bank of India) by September 30, each year.
In formulating the new policy, the government was of the view that marketplaces should be just marketplaces and not have stakes in their own vendors or have any such linkage with the sellers who sell on their platform.
The result of the policy was that by 1st February 2019, the date by which the policy provision were to be complied with, ecommerce players had to take away lakhs of products from their platforms.
Exclusive Deals Offered By Online Marketplaces
A number of companies, especially mobile handset makers, were launching their products exclusively on certain ecommerce websites which was harming the sales of the physical stores. Such store owners were complaining for long that that their business was being affected due to some of these practices of the online marketplaces including offering deep discounts by virtue of deep funding that they receive from private equity funds.
Level Playing Field For Online Players
Now with the trend of deep discounts gone and the marketplaces are no longer able to manipulate the pries of products, there is some level playing field with physical store owners and that is a going to buoy the commercial real estate market as customers will find parity in prices of products sold on online marketplaces and in physical stores.
Electronics, garments, perfumes, footwear and consumer durables are specially some of the categories where physical store owners will be able to compete with online market places and this should have the overall effect of boosting commercial real estate prospects, say real estate experts.