Confederation of All India Traders (CAIT) recently requested the government to put a stop to the festive sales by online platforms Amazon and Flipkart. The reasons the trader body cited are that, for online retail, through their deep discounts, they were violating the nation’s foreign investment rules. Demanding a ‘blanket ban’ on these sales, CAIT, which represents 500,000 merchants and traders in the country, also urged the government to probe these violations of FDI norms.
Indians make huge purchases that include cars and gold jewellery during Dassehra and Diwali and the two e-commerce players hold their annual sales ahead of the festive season. Both the e-commerce companies have these big sales in September/October and have almost everything on huge discounts, from electronics, to fashion, to home appliances, etc. They have categorically stated earlier that sellers offered deals and discounts on their platforms.
The CAIT, in a letter to the federal trade minister said that by offering deep discounts that range from 10 to 80 per cent on their online platforms, the companies were influencing the prices and creating an uneven level playing field, which was directly in dispute of the policy.
It seems unlikely that the CAIT’s demand of a blanket ban on festive sales of these e-tailers could be met by the government before this year’s sale season starts. However, it may help to frame government policy on deep discounts. As per FDI rules, in inventory-driven models of e-commerce, India does not allow foreign direct investment that are used by Walmart and Amazon in the US, where an e-commerce firm owned goods and services are directly sold to retail customers.
In late 2018, the e-commerce rules were modified to protect India’s huge unorganised retail segment that does not have the wherewithal to purchase at a large scale and offer huge discounts. Amazon and Flipkart were forced due to these rules to redesign ownership structures and alter some major vendor relationships and agreements.
‘Big Billion Days’ sale event was awaited by over 100,000 sellers on its platform said Flipkart, when asked to comment. Mr Rajneesh Kumar, Chief Corporate Affairs Officer, Flipkart Group stated that the company empowers sellers with business insights that allow them to decide the best value for their own products so that they could deliver benefits ad savings to consumers and simultaneously scale up their businesses.
While Amazon stated that the festive sale was used by over 500,000 sellers to reach customers. A big chunk of these, said Amazon, were small businesses, start-ups, weavers, artisans, and women entrepreneurs. A spokesperson for Amazon said that sellers decided the pricing for their products on their marketplace and they offered their choice of selection to their customers across India at prices that they felt was right.