The Indian government approved FDI in multi-brand retail unto 51%, allowing International retailers to set shop in India. How this impacts e-commerce is still not clear, although a number of players in the segment have been structuring their businesses in a way where foreign investment is not directly reflected in their B2C operations. Note that the government already allows 100% FDI in business to business e-commerce ventures. Although, companies operating in the e-commerce space are still waiting for more clarity, most have welcomed the government's decision. Here are a few initial reactions: Vishal Mehta, Founder & CEO of Infibeam, believes that the policy applies to e-commerce retail but he adds that not much will change with the onus being on state governments, unless more clarity is provided. "Prior to opening FDI in multi branded retail, many e-commerce ventures were able to work around multi-brand retail FDI policy." According to Mehta, the most commonly used workaround used by e-commerce players was setting up a B2B company where 100% FDI is allowed, and keeping inventory, technology and promoters' ownership the in B2B company, while creating a B2C company which issues invoices and collects payments from customers; the B2B company billing B2C company at arms length. He feels that the move is good for e-commerce start-ups as more retail brands and selection would be able to participate in the India retail story. Mehta also adds that physical stores will not be able to cover tier 2 and 3 cities; but ecommerce will, and…
