Retailer Body Flags FDI Concerns Over Amazon, Flipkart Quick Commerce Push

The All India Consumer Products Distributors Federation (AICPDF) has written to the Ministry of Commerce & Industry, asking it to examine whether foreign-funded ecommerce companies are allowed to run inventory-led quick commerce businesses through warehouses and dark stores under India's foreign direct investment (FDI) policy.

In its letter, a copy of which has been reviewed by Business Standard, the federation sought clarity on whether the government has amended existing rules or granted specific approvals allowing foreign-funded marketplace entities such as Amazon and Flipkart to operate quick commerce through such infrastructure.

What the FDI Policy Says

Citing the Consolidated FDI Policy and DPIIT's 2018 Press Note 2, AICPDF said 100% FDI is permitted only under the marketplace model, which does not allow platforms to own inventory, influence pricing, or favour select sellers. The federation said the dark store and fulfilment centre network used in quick commerce raises questions about whether practices around inventory control, pricing and logistics are in line with these conditions.

The federation said the current quick commerce model runs through a dense network of warehouses or dark stores, usually located within a 3-5 kilometre radius of consumers. It said these dark stores appear to be centrally managed, with inventory planning, stocking, pricing, promotional schemes, discounts, logistics and customer experience directed and controlled through the platform.

The report cited an executive at a large ecommerce company, who pointed to policy changes made by the government in 2022. That year, the government permitted 100% FDI under the automatic route in food processing, and allowed 100% FDI through the government approval route for retail trading, including ecommerce, of food products manufactured or produced in India.

The executive said that for non-food categories, warehouses continue to be used, but ownership of the inventory remains with the sellers, not the platform.

Federation Seeks High-level Panel

AICPDF has asked the government to set up a high-level committee with representatives from the DPIIT, the Ministry of Commerce & Industry, the Ministry of Finance, the Competition Commission of India (CCI), the Central Consumer Protection Authority (CCPA), trade associations, distributors and consumer representatives, the report added.

The federation said this panel should study the long-term effects of quick commerce on competition, employment, investment, consumer welfare and India's wider retail sector. It also sought policy measures for a fair, transparent and level playing field, while protecting the livelihoods of an estimated 14 million retailers, 450,000 distributors and others linked to the retail trade.

AICPDF said growing competition from digital commerce platforms has already pushed many retailers to shut down in recent years. It said that if foreign-funded marketplace companies are allowed to enter quick commerce using inventory-controlled models, the impact on employment, entrepreneurship and small businesses could be significant.