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E-retail discounts may continue

March 31, 2016 19:59 IST
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The government guidelines say online marketplaces must not influence the sale price of goods and services but experts say e-commerce majors categorise discounts under marketing expenses.

Major e-commerce companies such as Amazon, Flipkart or Snapdeal are unlikely to do away with attractive sales and discounts, said people tracking the sector, a day after the government announced it was allowing up to 100 per cent foreign direct investment in the segment.

The government guidelines say online marketplaces must not influence the sale price of goods and services but experts say e-commerce majors categorise discounts under marketing expenses.

“All companies have a budget for marketing and the discounts are accounted for in their marketing budget. The government statement is anyway quite broad-based and does not say anything about not giving discounts or staying away from predatory pricing. Companies can always say it is part of their marketing budget,” said a senior executive of a Delhi-based e-commerce entity.

A relevant example is the car market, where deep discounts are given by manufacturers and by dealers.

It gets accounted under marketing expense in the balance sheet and not as discounts. 

Sector experts say, though, that marketing and advertising strategies might change.

For instance, the billboards across cities talking of big-bang sales might fade away for a while but not discounts. 

In fact, the government guidelines are open to wide interpretation. There’s no mention of discounts or predatory pricing.

The key line simply says, “E-commerce entities providing a marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field.”

The point is, how will anybody ensure if the platform owner is influencing the sale price of goods or not, ask insiders.   

“I do not think it will have any effect on the discounting strategy. E-commerce players are still acquiring customers and if they stop giving discounts, it will surely impact their growth,” argued Arvind Singhal, founder of Technopak.

However, the way they offer discounts might change, he said.

Any government move to tinker with e-commerce discounting will be anti-consumer, he added.

“It is not the government’s business to be worried about discounting.” There’s the Competition Commission of India to keep these companies in check, he noted.

The new guidelines also absolve the platform owners of responsibility for customer satisfaction.

“Post sales delivery of goods to the customer and customer satisfaction will be responsibility of the seller.”

It is here that some analysts, who did not wish to be named, said platform owners should be held responsible, as a buyer trusts companies like Amazon, Flipkart or Snapdeal and therefore transacts on these sites.

Traditional retailer associations, though, are happy that some checks have been brought into the e-commerce sector, becoming a formidable opponent to physical stores.  

But, agrees Kumar Rajagopalan, chief executive, Retailers Association of India: “I don’t think discounting will stop.’’ There’s always a worry about predatory pricing, he said, adding companies can easily offer cash-back schemes.

NEW RULES

  • The guidelines say online marketplaces must not influence the sale price of goods and services but experts say
  • e-commerce majors categorise discounts under marketing expenses
  • They also absolve the platform owners of responsibility for customer satisfaction
  • Traditional retailer associations, though, are happy that some checks have been brought into the e-commerce sector
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