E-commerce giants like Amazon and Flipkart may soon face the wrath of regulation if they are deemed guilty of unfair competition.
Customers are in for more expensive shopping days as deep discounting by e-commerce firms, irrespective of the fundamentals involved may become an untenable proposition. Large offline distributors and retailers/retail associations of smartphones and consumer electronics like Viveks, Girias, Shahs, Sathya and Vasanth and the All India Mobile Retailers Association (that represents 25,000 mobile phone retailers) are up in arms against this practice, which they deem as unfair competition.
The only difference is that while their guns were trained on e-commerce marketplaces earlier, leading retailers and distributors of smartphones and consumer electronics are now accusing manufacturing companies. Brick-and-mortar retailers allege that some manufacturers unfairly incentivise e-commerce firms with better prices and/or seamless supplies and have threatened to stop stocking products of these manufacturers.
Flipkart and Amazon counter that they have no say in pricing. Manufacturers say that they do not differentiate between sales channels and even have separate product lines for the two mediums.
Praveen Khandelwal, secretary general, Confederation of All India Traders (CAIT) stated, “We have recently met officials of the ministry, who are making the new e-commerce policy. We have urged to put certain clauses to check e-commerce firms giving huge discounts and freebies as it is damaging the trade fabric of the country.”
Festive season sales by Amazon and Flipkart have badly impacted brick-and-mortar sales of consumer electronics and smartphones, with some retailers claiming a decline by up to 50%. In comparison, online retailers had a great time, with sales in October and November reaching US$ 4.3 billion, a growth by 43% yoy. To counter the growing threat, 1,600 cellphone distributors have jointly formed the All India Mobile Distribution Association to improve their leverage against manufacturers.
Union Minister of Commerce and Industry Mr Suresh Prabhu is also expected to review the e-commerce policy being drafted by Department of Industrial Policy and Promotion, and some restrictions on differential and predatory pricing strategies like deep discounts may come under consideration.
This could include clarity on flash sales and what their duration should be. Prabhu had said in the Lok Sabha that e-commerce firms in a dominant position in the market could be brought to book under Indian competition law if they abuse their position.