FDI in e-commerce: Online discounts may continue, even with riders

Consumers can continue to rejoice as price discounting may be tough to stop in e-commerce. It’s true that the government has introduced safeguards, in the form of riders, while allowing 100% foreign direct investment in e-commerce market place. But those riders may not necessarily result in companies like Amazon, Flipkart, Snapdeal and others doing away with attractive sales and discounts, people tracking the industry said a day after the NDA government came up with the surprise announcement.

According to industry experts, marketing and advertising strategies may change. The screaming hoardings across cities talking of big bang sales may fade away for a while, but not discounts.

In fact, the government guidelines are carefully worded, and open to wide interpretation. There’s no mention of ‘discounts’ or of “predatory pricing”. The critical line in the DIPP guidelines simply says, “e-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field.” The point is, how will anybody ensure if the platform owner is influencing the sale price of goods or not, asked industry insiders.

“I do not think it will have any effect on the discounting strategy of ecommerce players. They are still acquiring customers and if they stop giving discounts, it will surely impact their growth,’’ argued Arvind Singhal, founder of leading retail consultancy Technopak. The way they offer discounts may change, he said. Any government move to tinker with e-commerce discounting will be anti-consumer, according to Singhal. “It is not government’s business to be worried about discounting. There’s Competition Commission of India (CCI) to keep these companies in check,” he added.

The new guidelines also put the responsibility of customer satisfaction on sellers, rather than on platform owners. “Post sales delivery of goods to the customer and customer satisfaction will be responsibility of the seller.” It is here that some analysts who did not want to be named said that platform owners should be held responsible for customer satisfaction because a buyer trusts companies like Amazon or Flipkart or Snapdeal and therefore transacts on those sites.

Brick and mortar retailer associations though are happy that some checks and balances have been brought into the online ecommerce sector which has become a formidable opponent to physical stores. But, Kumar Rajagopalan, CEO, Retailers Association of India, pointed out, “I don’t think discounting will stop.” There’s always a worry about predatory pricing he said, adding that companies can easily offer cash back schemes.