The recent complaint by the Indian Cellular Association (ICA) to the Commerce Minister, Suresh Prabhu, over violation of FDI norms by Amazon and Flipkart for offering discounts on mobile handsets and other electronic items has revived the offline–online rift. Meanwhile, media reports say that Amazon has denied that it was violating any FDI norms and follows all the norms very judiciously. Experts, with whom THE WEEK spoke to, have said that since the offline retail is in a transition stage in India, such issues will be an ongoing phenomenon.
Telecom expert such as Zia Askari, editor of TelecomDrive.com, feels that there is no doubt that all the online retailers offer discounts by circumventing the norms. And this has created huge pressure on the offline retail market in India. “There are a large number of retailers who have already closed down their shops or moved towards other segments, because of this menace. It is an irony that the offline retailers invest in creating and nurturing relationships with the customers, while online companies only focus on one thing – offering discounts. Even though many brands started their operations only through online retailing (like Xiaomi and OnePlus), these very brands are now expanding business on offline front too. This necessarily suggests that offline is the place to be when it comes to making your brand presence felt and gaining market share. The government should act now and control this uncalled for discounts happening in the online space," Askari told THE WEEK.
Another expert Alok Shende of Ascentius Consulting Mumbai said that though much more clarity is required on as to what norms have been violated by Amazon and Flipkart, as the government would have themselves acted upon, if there would have been any violation of any sort by the two e-commerce companies. “The e-commerce players usually procure their material from high up from the supply chain say a national distributor and get it at a much discounted rate and for the offline mode there are many more layers of distribution and also they also have to bear the cost of rent or pay their staff in managing their retail stores which e-commerce players do not have to. So in a way this is an ongoing tussle among the two modes and will continue for the time to come as Indian retail is still in a very transitory stage,” said Shende.