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New rules may boost revenues of India's offline retailers

Jan '19
New rules may boost revenues of India
Stricter regulations for e-commerce players may help augment revenues of brick and mortar retail stores in India by 150-200 basis points (bps) or ₹10,000-12,000 crore in fiscal 2019-20, ratings agency CRISIL said recently. As e-retailers re-engineer models to conform to the stringent norms, it would slow down their revenue growth, CRISIL said in a statement.

The Indian Government last month introduced new regulations that would bar online marketplaces with foreign investments from selling products of the companies where they hold stakes, and ban exclusive marketing arrangements. The norms will be effective from February 1.

These norms, which are effective February 1, would hit Amazon and Walmart-backed Flipkart the hardest. These two e-commerce platforms are also the largest in the country.

Nearly 35-40 per cent of e-retail industry sales, amounting to ₹35,000-40,000 crore, could be impacted due to the tightened policy, a news agency report quoted CRISIL Ratings senior director Anuj Sethi as saying.

The impact would be largely in the electronics and apparel segments, which account for a bulk of their revenues, he added.

CRISIL noted that e-retailers will need to make changes in their supply chain and may alter business model in several ways, including adoption of franchisee model, thereby leading to a rise in the cost of compliance as they strive to adhere to revised guidelines.

Between fiscals 2014 and 2018, e-retail in India grew at 40 per cent a year to reach ₹1 lakh crore, way faster than brick & mortar retail shops’ growth at 13 per cent to ₹3.2 lakh crore during the same period, the CRISIL statement said.

However, long-term growth potential for Indian e-retail continues to remain strong driven by increasing internet penetration, growing household private final consumption expenditure and convenience offered by online shopping, CRISIL added. (DS)

Fibre2Fashion News Desk – India

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