E-tailers Go Great Lengths to Get You Steep Discounts
Amazon, Flipkart and Snapdeal are adopting several models to ensure that merchants on their portal offer discounted prices
RADHIKA P NAIR & ADITI SHRIVASTAVA
With price being the most potent weapon in their arsenal, online retailers looking to snare more customers are cajoling sellers to offer steep discounts and reimbursing those who do so. The country’s largest online marketplaces like Amazon.in, Flipkart and Snapdeal are adopting several models to ensure that merchants on their portal offer discounted prices. Their unbridled aggression is drawing the ire of smaller peers as well as traditional retailers who are struggling to keep pace. “P&G gives a margin of 13% for a pack of Pampers diapers. But Amazon was selling it at a discount of 28%,” said the founder of an online site that sells baby care products among other categories. “How is that fair? We can never match that kind of discounts,” said the person on condition of anonymity. Amazon declined to comment. As the fight for top honours in India’s .` 12,000crore online retail industry acquires a razorsharp intensity, portals are doing all they can to attract and retain customers. Officially most portals maintain that they only offer a technology platform where merchants sell to customers, that they have little role to play in pricing. However, several merchants that ET spoke to said they are constantly badgered to drop prices. “The first level of price control happens when the seller uploads his catalogue”, said Sayak Sahu, founder of IE Ventures that runs design-led gift products and gadgets firm Smiledrive. He sells products on Amazon, Snapdeal, Flipkart and eBay and is urged by each to compare prices for similar products and offer the lowest price. “We get regular calls from category managers of all sites. They tell us to give earth-shattering discounts,” said Sahu, who sells only online and expects sales of .` 5 crore this fiscal. When marketplaces want to run across-thesite or category-wide discounts, the cost of discounting is borne fully by the merchant, split between merchant and portal or paid for completely by the e-tailer.
Often the online retail company takes the entire hit for discounts. “I had listed a wi-fi adapter for .` 399 on Snapdeal which they sold for .` 299, but I got my price,” said Devesh Tanna, CEO of Mumbaibased VeeDee Enterprises, an electronics seller who earns .` 1.5 crore a year from marketplaces. Snapdeal declined to comment for this article.
Such strategies, termed as predatory pricing are creating ripples of discontent across the country’s fast growing ecommerce industry, expected to grow to $56 billion in the next decade.
Saurabh Malik, business head at Indiatimes Shopping, said that while the portal co-funds some of the discounts, most are funded by sellers. “We are against the philosophy of selling products at loss,” said Malik.
Amazon too reimburses merchants. In an email sent to sellers at the end of 2013 when the marketplace introduced Amazon Marketing Promotion Program, the company said “Amazon will pay for the promotional activities carried by you only for those orders wherein the customer has purchased those items under promotion within the validity of the promotion period at the specified discount price.”
Flipkart, on the other hand, makes adjustments in commissions. “In some promotional campaigns, we either reduce or waive our commissions to allow sellers to offer better prices to customers,” said Ankit Nagori, VP (marketplace) at Flipkart. “However, we do not reimburse sellers as this is not in the spirit of a true marketplace.”
Experts said these kinds of discounts are legal. “It is a marketing expense aimed at gaining customers,” said Arvind Singhal, chairman of retail advisory Technopak. “However, if it falls under predatory pricing then there could be a problem.”