There has been media reports of a possible government plan to impose checks on the discounts and cashback deals offered by e-commerce companies to attract customers. It is being said this move is part of the WTO push to globally regulate online businesses.
The e-commerce industry has undoubtedly hurt the fortunes of scores of brick and mortar retail stores across the country as firms like Amazon and Flipkart and others have reached every nook and cranny of the country. Their reach is posing a threat to offline retail stores who have been opposing the unrealistic discounts the online firms have been offering.
Experts feel that in case the government finally decides to put a cap on the discounts online firms offer to customers, it is going to turn their approach upside down. “E-commerce, as it functions presently, has the ambition to exploit the market opportunities available since they are the one to formalise informal markets or aggregate fragmented ones. This advantage is going to fade away and they would then be placed at the same level even after infusing money,” Rajiv Ranjan, CMD of the P2P platform PaisaDukan.com, told THE WEEK.
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Ranjan, who is also an expert on the e-commerce market in India, added that e-commerce players have a tremendous advantage as they do not have to spend on physical infrastructure and hence pass on the benefits from this cost savings in the form of discounts to attract customers.
“Not allowing such discounts is definitely going to impact e-commerce players against this organic benefit. Restrictions on discounts will also affect the volume of funding that these players have received to drive their operations. Instead of impacting the entire e-commerce industry, the government can think of giving preference to Indian e-commerce companies so that there is fair amount of competition in the market, making sure that Indian companies do not lose out to foreign players and foreign players do not gobble up the entire space.” said Ranjan.
On the other hand, brand experts such as Harish Bijoor feel that a restriction on discounts by the government will create a bit of a roadblock for the e-commerce players, but they will come up with more creative ways to sell their products, possibly without even calling it a discount.
“There will be a focus on differentiated service for a start. One can even expect dynamic pricing to go berserk as well. For instance, e-commerce players such as Urban Ladder that sells furniture has dynamic pricing that goes up and down as it lures and baits consumers. Many a time, a customer gets a mail that says a piece of furniture has a price drop. Reason could be anything—the sourcing cost, the price of fuel, a festival. And when you finally decide to buy, the price may have gone up a wee bit, but one still buys the furniture piece,” said Bijoor.
