Amazon India Clarifies Sellers Set Prices Independently Without Any Intervention Ahead of festive sales, e-commerce giant Amazon India denies accusations of deep discounting

Traders body Confederation of All Traders (CAIT) on Tuesday said that e-commerce companies including Amazon and Flipkart are violating existing FDI norms through the festival sales. "Holding such sales and offering deep discounts are clear violation of Press Note No. 2 of FDI policy 2018," CAIT National Secretary General Praveen Khandelwal said.

Responding to the complaint, Gopal Pillai, Vice President - Seller Services, Amazon India stated, "Sellers set the prices independently. We don't get involved at all," adding that people are looking at the scale, not just the margin. These annual sales provide an opportunity for sellers to increase their base. "They are able to provide such discounts because of their cost of capital," he justified.

Explaining how it works, Pillai stated that unlike physical retail where one needs to add a certain number of people whenever they open a new store, in e-commerce, they can satisfy the needs of 100s of people from the same garage leading to an economy of scale giving better leverage to cost of capital investment. That reduces the overall cost of operation due to which the savings can be passed onto the customers.

No Slowdown in E-commerce

Two of the biggest e-commerce giants in India – Amazon and Flipkart have announced their festive season sales from September 29, 2019. At a time when the Indian shoppers are touted to be holding back on big-ticket spends due to a slump in the economy, both the players seem overly optimistic about the sales.

Flagging off a unique "house-on-wheels" yatra, as a run-up to its festive sale - Great Indian Festival - Manish Tiwary, vice-president of category management, Amazon India stated, "We don't see any sign of a slowdown. That's because e-commerce per say is so small that it will take a lot of time for any slowdown to hit what is the smallest size of the business."

From Consumer Packaged Goods (CPG) to large appliances, Amazon India hasn't seen any signs of a slowdown. 70 per cent of the customers that shop during festive seasons come from smaller towns. That population is the least impacted by any kind of slowdown in the economy. Moreover, online sales have gained prominence for shoppers across India on the back of attractive discounts and offers.

Value for Customers & Sellers

In an exciting turn of events for Amazon India, the number of customers coming to the platform and shopping has increased after the launch of Hindi version. Amazon India rolled out a Hindi version of its shopping site to reach a large swathe of middle-income shoppers. With respect to customer service and seller support, Amazon India is providing these services in five languages.

Currently having over 500,000 active sellers who are involved in the commercial activity on the marketplace spread across all kinds of towns and cities, Amazon India is bullish about the confidence it has been able to instil in commercial sellers who keep coming back to the platform for selling products.

There are reportedly 50 million SMEs in the country and e-commerce platforms have become a home for many of them. Commenting on providing a platform to small traders who can't be physically present at multiple locations but are making a national mark through e-commerce, Tiwary stated, "Geography and logistics are no longer a constraint for sellers."

The Reverse Effect?

Interestingly, a report by research firm Kantar on Monday stated e-commerce sales have dipped in the first half of the year during the lesser discounts. In a reflection of customer sentiments, the average ticket size has fallen 27 per cent in the first six months compared with the same period last year whereas average customer spending is down 21 per cent.

First published in The Economic Times, the report stated that the overall economic slowdown is reflecting in online customer sentiment. "Consumers seem to be cautious and taking their time before making purchases." Considering that Amazon and Flipkart comprise the bulk of India's online retail market, the impending festive sales are expected to spike online sales.

However, owing to sluggish market demand, the online marketplaces are expected to register only 25-27 per cent sales growth during the crucial festive season, slower than last year's 35 per cent. E-commerce companies have generally been able to buck slowdown trends primarily due to their ability to guarantee better prices than offline retailers.