Retail details: Ecommerce fails traditional businesses

E-commerce majors may feel the heat from traditional retailers now as the latter launch a nationwide movement to protest against online giants such as Amazon and Flipkart, reports TEHELKA BUREAU

Our Special Story in Tehelka in the previous issue was about e-commerce outlets pushing big retailers to bankruptcy with top brands announcing closure of stores. Now days after the story, the traders body CAIT has threatened to launch a nationwide movement to protest against e-commerce majors Amazon and Flipkart, alleging they are flouting FDI Policy norms and destroying retail business. The Confederation of All India Traders said that a memorandum would be submitted to MPS and “dharnas” would be organized in 200 cities.

It is learnt that the Competition Commission of India (CCI) is planning a policy advisory for the e-commerce industry to come out with solutions over concerns over deep discounting and predatory pricing across online platforms. The CCI would issue a soft policy advisory in this regard shortly.

CCI Chairperson Ashok Gupta agreed that, “nobody can deny that online is here to stay” but added that e-commerce industry has to address all concerns being raised by retail sector in India.

Praveen Khandelwal, secretary-general, Confederation of All India Traders (CAIT) observed that “Policy is the domain of every country and if multinational corporations wish to carry on business, they are under obligation to follow the policy in letter and spirit”. Khandelwal said that “Customers are going online because of the unbelievable discounts. Because of this sales at offline businesses are down 30 per cent to 40 per cent this month.”

Of late, there have been complaints galore about deep discounting and offline traders are up in arms against the e-commerce companies and the government demanding a “level playing field”. A policy is likely to be decided in next couple of months with e-commerce players insisting that more foreign investment must come in and business environment improved. The prospective policy would limit the maximum discount on a product and give detailed break-ups of the discount in the pricing details, to ensure e-commerce portals are not the ones financing it.

The CAIT has been pressing hard and the government has made it clear that it wants to ensure offline retailers are not rooted out by major e-commerce firms. Online marketplaces, on their part, have always maintained that they were following all the guidelines around discounting and that it is the seller offering the discounts. Offline traders or traditional traders want the policy framework in place with a clarity on the issue of deep discounting pricing.

E-commerce companies offer deep discounts particularly before the onset of festival season. Recently before Diwali and other festivals, the online companies launched their heavy sales and offered unheard of discounts. On their part, the e-commerce platforms have been claiming that deep discounts are offered by the sellers only. They are at pains to explain that e-marketplaces themselves have not directly or indirectly influenced them on the matter.

The traditional retailers and trader bodies like CAIT allege that online companies come out with mega sales under their names and not in the name of different selling brands. It is learnt that the government is looking into whether hefty discounts offered on Walmart-owned Flipkart and during their online festive sales violate foreign investment rules. The government was reviewing complaints and evidence filed by the Confederation of All India Traders, a group representing some 70 million brick-and-mortar retailers.

The traders’ body CAIT has announced a series of actions and protests this month to get the government’s attention. It had earlier written to the Prime Minister urging him to take action against ecommerce discounts. It is learnt that farmers, hawkers, small industries and self entrepreneurs will be asked to join the movement. Reports suggest that after taking ecommerce companies to mediatory meetings, courtrooms, and the government, the Confederation of All India Traders has now called for a nationwide agitation against Flipkart, Amazon and other ecommerce companies to continue its months-long protests.

Actually, the major issue is of neutrality because online sales directly affect the profitability of traditional sellers and the e-commerce creates a sort of “conflict of interest.” A survey by The E-Commerce Council of India (TECI) found that 89 per cent of the respondents felt that neutrality of the marketplace was important as a core principle and that marketplaces should not have any of its own or related party sellers on the platform. Also about 94 per cent felt that sellers controlled by the marketplace hurt the business of independent sellers on the platform. About 90 per cent respondents said private labels by marketplaces create a conflict of interest for the marketplace and that marketplaces should not be allowed to sell their private labels on their platform.”

Survey done by TECI, saw participation from 541 respondents who were selling online for at least 12 months on Flipkart, Amazon, Snapdeal, Paytm Mall and ShopClues. The survey found 89 per cent respondents saying “the laws, rules and responsibilities for online sales should have parity with those for offline sales”.

While the survey obliquely supports the view point of the CAIT, the traders body has alleged that both Flipkart and Amazon are flouting the government’s foreign direct investment (FDI) policy rules and destroying the country’s retail business through predatory pricing and deep discounting.