The discount war on GOQii products has landed Walmart-owned India’s e-commerce giant Flipkart in troubled waters. A quick backgrounder — Flipkart, which claims itself to be a neutral platform to facilitate transactions between buyers and sellers of products, has been alleged by fitness wearable device maker GOQii of selling its products at around 70 per cent discounts that GOQii never asked for Flipkart to offer as it has a direct contract with the e-commerce firm instead of selling its products through sellers.
The matter turned ugly when GOQii sued Flipkart last month to stop selling heavily discounted GOQii products and explain its position over the matter in a Mumbai court for which the next hearing will be heard on Friday, as Reuters reported. “I don’t understand why Flipkart cannot stop the sale when we have asked them to stop it and discuss this. People are assuming that they are not genuine products because of such low prices,” GOQii founder and CEO Vishal Gondal had told Financial Express Online.
Then came online sellers’ body All India Online Vendors Association (AIOVA), which is already fighting a battle against Flipkart at the National Company Law Tribunal (NCLT) for its alleged use of dominant position in the market to favour select sellers, to strengthen its case with the current GOQii issue.
AIOVA, which represents 3,500 online sellers, is planning to file a plea to add the GOQii battle in its war against Flipkart, Reuters reported. “We are exploring legal options. We have received representations from multiple sellers regarding a similar issue,” an AIOVA spokesperson told Financial Express Online.
Taking a Hit?
Eventually, what would this mean for a company of a size of Flipkart backed by Walmart — one of the world’s largest retailers?
“The court will test the issue of predatory pricing of products and is also likely to analyse if Flipkart influenced the prices. This finding will have a significant bearing on the business practices of Flipkart since Flipkart maintains that it is compliant with the FDI in e-commerce guidelines which prohibit such practices on marketplace platforms,” Siddharth Mahajan, Partner, Athena Legal told Financial Express Online.
Issues of fakes, tampered product packaging, defective products, deep discounting etc., have been as old as e-commerce companies in India. For instance, US footwear Sketchers had sued Flipkart over fake products issue in 2017, direct selling brand Amway had last year took Flipkart for reportedly selling its products without its permission etc. Further, issues of adulterated products with respect to brands like Maggi, Coke/Pepsi etc., couldn’t have a long-term impact on the brand. They continue to thrive. Moreover, in Flipkart case this time, it is about giving heavy discounts and that’s what customers love.
“I don’t think this is a big issue for Flipkart. Had this happened in the US or Europe, the brand would have taken a big hit but in India, customers have a different mindset and that is about discounts,” Arnav Gupta, an analyst focusing on finance and retail at Forrester told Financial Express Online.
A survey by Forrester last year had said that 40 per cent or above of 2,000 customers surveyed are happy to share their personal info for better customer experience and discounts or cashbacks.
“So while customers will be more conscious of buying on online with respect to fakes but this hasn’t stopped customers from stopping online shopping. Flipkart might take a small hit on its valuation but it won’t lose customers or impact growth as India is a very competitive market and discounts play a major role. Also, brand recall is very high among online shoppers,” said Gupta. Hence, even if the court decides against Flipkart, it might only move a needle or not even that when it comes to taking a hit on its growth.
So far Flipkart hasn’t commented explicitly on the matter except asserting that it is “fully compliant with Indian Law,” a Flipkart spokesperson said as the company is “engaged with the supplier to come to a swift resolution.”