title-bar

Good news for shoppers? E-commerce policy may not stop discounting by e-tailers?

By: |
Chennai | Updated: April 8, 2016 9:07:27 AM

The recently introduced e-commerce policy is unlikely to change the discounting model of online retailers in the near-term, says India Ratings and Research (Ind-Ra).

ecommerce, digital commerceAccording to Ind-Ra, the traditional offline retailers are unlikely to benefit as the policy is directed towards defining and limiting the scope of operations of e-commerce business.

The recently introduced e-commerce policy is unlikely to change the discounting model of online retailers in the near-term, says India Ratings and Research (Ind-Ra).

It says the policy is a step towards regulating the e-commerce industry in India but gaps in the policy framework continue to exist.

According to Ind-Ra, the traditional offline retailers are unlikely to benefit as the policy is directed towards defining and limiting the scope of operations of e-commerce business.

The policy aims to define and ring fence the marketplace operation activity of e-commerce players (e-tailers) and to distinguish the scope of marketplace and inventory based model as the foreign direct investment (FDI) allowed for both the models is different.

The new guideline prohibits marketplace e-tailers from ownership of goods, thus act as facilitator’s between buyers and sellers and not influence the selling price of the goods. This, Ind-Ra says is a move by the ministry to discourage the deep discounting strategy adopted by e-tailers.

However, in the absence of additional clarity on the policy, adherence for the same will remain a challenge. The e-tailers can continue to exploit the loopholes or adopt innovative strategies to extend deep discounts, till a stringent framework to prohibit and bring a level playing field with offline retailers is put in place.

The cap of 25% for an e-tailer’s sale from single vendor or group company can impact the top line of the e-commerce firms. E-tailers with concentrated vendors will have to undergo significant restructuring of their business model.

E-tailers namely Amazon Seller Services and Flipkart India generate major portion of their sales from joint venture vendors namely Cloudtail India and WS Retail Services respectively. To mitigate the impact of the same, Ind-Ra believes that e-tailers may adopt multiple vendor strategy which will enable them to have control over pricing.

Ind-Ra says the policy is a step towards safeguarding customer interest by introducing additional disclosures. Guidelines to disclose applicability of warranty/ guarantee when sold through the e-tailer will help bring clarity and transparency in the sector.

This is a move to empower the manufacturer/seller’s towards positioning their brands, thus addressing concerns over deep discounts offered by online retailers which are impacting their brand’s reputation.

Ind-Ra points out that with the introduction of a more comprehensive policy and its successful implementation thereafter, e-commerce could transform itself into a more mature market.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition