E-commerce discounts, pricing difficult to control

Talk of a possible revival of the e-commerce policy that was earlier scrapped by the government is making rounds in the ministry circles lately. The catch this time around is that the government could be including specific rules and regulations aimed at putting an end to the predatory pricing strategy, heavy discounting and distributing freebies approach adopted by the likes of Amazon, Walmart-owned Flipkart and Alibaba-backed Paytm among others to lure shoppers on their respective e-marketplaces.

Speaking to DNA Money, e-commerce industry experts said the government appears to be working on reviving the policy or certain parts of it. But can the government really tighten the reins of e-commerce players? “There’s no chance actually. I think it’s very impractical,” said K Vaitheeswaran, e-commerce pioneer and author of Failing to Succeed.

He said the government is not understanding the challenges of e-commerce operations management. “Physical retailers can only stock a few thousand stock keeping units (SKUs) compared to online sites that have millions of SKUs. So who is going to monitor the price and how will they do it? It’s practically impossible for anybody, including the government, to actually monitor prices,” said Vaitheeswaran.

In such a scenario, he said the only thing government can say is that you cannot sell below a certain price. “However, that’s also a very wrong thing to do from a business point of view. It’s not the government’s job to figure out pricing. Besides, why should the government bother at what price is Amazon or Flipkart selling a mobile phone or any other item on their website? I think they (government) should stay away from this,” said Vaitheeswaran, adding that the revival of the e-commerce policy could also be specifically aimed at benefitting the Indian e-commerce companies thereby going back to the protectionist economy of yesteryears.

According to media reports, the draft e-commerce policy that was under consideration by the government a couple of months ago, had proposed a sunset clause for predatory pricing policies by e-marketplaces. This included zero payment offers, flash sales and unlimited offers and it had plans to define such practices while also setting fixed norms for each. Reports further suggested that after the last policy faced heat from both companies and the civil society, the Department of Industrial Policy and Promotion (DIPP) is putting together a fresh draft of the proposed e-commerce policy.

Harish H V, independent e-commerce consultant, said if one looks at it from another perspective, it is impossible to say what’s a reasonable or an unreasonable discount that’s being offered by e-commerce players. “You cannot force anyone and say that you cannot make a loss. As a government, it cannot dictate a business to make a profit or not make a loss. At the same time, you also can’t say that the business should make a profit and that I will guarantee it. It’s like telling the airlines not to sell discounted flight tickets to travellers or not to make profit,” he said.

While the government’s role in fixing a cap on pricing of the products is debatable, industry experts feel the government definitely needs to look at whether the customer is getting impacted or whether there are any unfair trade practices. 

“Again, these aspects are very difficult to prove. If the consumers are getting impacted or if they are not getting the right quality of product then the government definitely has a role to play there and that’s something worth taking up,” said Harish.

E-commerce players have so far ensured they are on the right side of the law and are conducting the business as per the rules and regulations set aside by the government. Thus, on paper there is hardly anything to point a finger on their wrongdoings. Besides, one needs to understand that physical retail is very much here to stay as no online player be it Amazon, Flipkart, Paytm, etc, can give customers the kind of convenience brick and mortar retail offers.

However, physical retail will have to find ways to be more competitive or take some kind of a collaborative approach to deal with the challenges posted by e-commerce players. Physical retail has its own set of advantages and they need to leverage on the same to gain over their counterparts in the online space. In such a scenario, what’s an ideal way to address the offline – online divide that keeps springing up every now and then without giving any concrete remedy?

“The world is changing fast and businesses need to take note of the same and adapt and improvise accordingly. Things are not going to be like what it used to be earlier. One can resist, fight and delay, but you cannot stop it from happening. Look at the way telecom space has changed with mobile telephony and internet, fixed lines have almost become extinct. Fortunately, the situation with physical and online retail is not that extreme,” said Harish.

Experts suggest that the government needs to put together a committee of people who understand e-commerce business and are able to draw parallels with offline retail. That way, policies can be put together to help create a business environment where both retail formats co-exist.

“That’s what is required and needs to be worked upon. Instead, what’s being done at the moment seems politically motivated. Small traders and retailers form a large part of the vote bank and this seems to be an attempt to please and get them on the side of the ruling party,” said an industry expert requesting not to be quoted.

CROSS PURPOSES

• The Department of Industrial Policy and Promotion is putting together a fresh draft of the proposed e-commerce policy
   
• The policy could be aimed at benefitting the Indian e-commerce companies