E- may lose Rs 10,000-12,000 crore revenues on tighter policy
Revenue growth of brick & mortar (B&M) retailers could increase 150-200 basis points (bps) in fiscal 2020, as e-retailers re-engineer business models to conform to the revised – and more stringent – regulations, which would slow down their revenue growth.
The Department of Industrial Policy & Promotion’s recent clarification on foreign direct investment (FDI) policy by e-retailers restricts equity ownership in sellers, caps the percentage procurement for sellers from e-marketplaces, and puts curbs on exclusive partnership with brands or providing favorable services to a few vendors. Further, the requirement of reporting compliance to the Reserve Bank of India on an annual basis would mean stringent implementation of these guidelines.
“Nearly 35-40% of e-retail industry sales, amounting to Rs 35,000-40,000 crore, could be impacted due to the tightened policy,” said Anuj Sethi, Senior Director, CRISIL Ratings. “The impact on e-retailers would be largely in the electronics and apparel segments, which account for a bulk of their revenues.”
CRISIL’s estimate suggests that if B&M retailers lap up even a fourth of the impacted sales of e-retailers, it would lead to top-line gains of Rs 10,000-12,000 crore. That, in turn, would mean revenue growth would be 150-200 bps higher at ~19%, compared with CRISIL’s earlier expectation of 17% for fiscal 2020.