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

The Economic Times - - Business Of Brands -

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.”

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