Just a day after Confederation Of All India Traders (CAIT) has dragged Ecommerce companies such as Amazon and Flipkart to court over alleged FDI violations, multiple online sellers have now reportedly said that these ecommerce companies have refrained from offering deep discounts during the festive season sales.
According to a media report which cited a source close to the development, ecommerce platforms had committed that their product prices will be maintained and no product will be sold below the net cost at which online sellers buy products from the brands, also called the landing cost.
To offer these low prices, sellers are said to have thinned their profit margins on the net landing cost. “Brands were under pressure due to poor sales in the preceding months and had dropped prices on their own to clear inventory and boost demand,” they added.
Multiple brands such as TV manufacturer Super Plastronics, fashion major Puma India, Arvind Lifestyle Brands, which sells brands such as Gap, Arrow, Tommy Hilfiger and US Polo Assn, Panasonic and OnePlus have reportedly confirmed to ET that the lowering of prices has been carried out by themselves.
Interestingly, this revelation came just a day after Amazon and Flipkart were dragged to the court by traders’ body which accused the ecommerce companies of continuous and repeated violations of the FDI policy.
The traders’ body also emphasised that these companies are engaging in deep discounting, predatory pricing, loss funding and controlling the inventory. CAIT claimed that they are converting their marketplace into an inventory-based model which is a clear violation of FDI policy.
Govt Efforts To Curb Deep Discounting In Ecommerce
To create a level playing field among ecommerce companies, Department for Promotion of Industry and Internal Trade (DPIIT) had proposed the draft ecommerce policy in February, and also implemented the new foreign direct investment (FDI) norms in ecommerce.
The FDI in ecommerce norms had prohibited ecommerce marketplaces from signing an exclusivity contract with the vendors. It had also restricted ecommerce players from purchasing more than 25% of their inventory from one seller.
Also, the government was earlier reported to be planning an ecommerce policy, which might set a limit on the maximum discount that can be offered on a product. The platforms may also be asked to give a detailed break-up of the discount in the pricing details to ensure ecommerce players are not the ones financing it.
Later in August, the central government had asked the ecommerce marketplaces to make reports from their statutory auditor public on their websites by September 30 to show that they are following the new FDI norms.