Indian retailers have declared war against FDI and e-tailers. Know more

Top brick and mortar retailers have moved the Delhi High Court against the Central Government, demanding change in Foreign Direct Investment (FDI) norms vis-a-vis eCommerce players in the wake of rapid growth of online shopping.

The case was filed by Retailers Association of India (RAI), which represents top retailers such as Future Group, Shoppers Stop and Reliance Retail.

"We are demanding parity," said lawyer Abhishek Manu Singhvi, who represents the country's largest lobby of organised retailers.

This is the second such method adopted by physical retailers against the government in the past six days. The country's branded stores operators did not attend a meeting convened last week by the ministry of commerce and industry to discuss FDI in eCommerce.

Sales of brick-and-mortar retailers have declined after eCommerce companies such as Flipkart, Snapdeal and Amazon.in have made major inroads into the retailing business in India by offering unprecedented discounts.

While India bars FDI in eCommerce companies selling products directly to consumers, it allows foreign companies to operate the so-called eCommerce marketplace that lends its platforms for other companies to sell their products.

"On paper, eCommerce can't have foreign direct investment. However, a whole lot of marketplaces are effectively retailing," Kumar Rajagopalan, chief executive at RAI, told the Economic Times.

"It is a convenient method of saying they are marketplaces, but they can get as much FDI they want. So there is no level playing field in India," he said.

Flipkart and Snapdeal have attracted billions of dollars in funding by operating such marketplaces while US-based Amazon.com has set up a fully owned subsidiary here and has pledged to invest $2 billion in India.

Physical retailers want a level playing field for both and want equal policies for both the offline and online channels.

Analysts, however, say that even if India allows similar policies for both offline and online retailers, store operators can’t attract the kind of investor response as eCommerce.

Even though India opened the retail business for global supermarkets in 2012 by allowing them to own up to 51% in local ventures, the showpiece liberalisation policy has discouraged a number of companies including clearance from state governments, mandatory 30% sourcing from small vendors and upfront investment of at least $100 million.

Because of such conditions retailers have not been able to get any fund amid so many clauses.

eCommerce companies have been spending millions of dollars in discounting products and large scale advertising to lure consumers, while physical retailers, which pay heavy rentals and have other establishment costs, say it's very difficult to compete with online retailers.

(Image: Reuters)