My twitter friends have taken a politician’s comments about ecommerce discounting practices quite negatively. He is quoted as saying“Investigation is the only alternative left with us. Selling an item which costs Rs 20 for Rs 18 is no business logic.”.
Do we see that as a statement against the Internet, modernization and progress? Have we gotten too comfortable with buying products at discounted online sales? When I started selling (and buying) products online in 2001-2002, the market was equally exciting, minus the big numbers. I bought my college bag for Rs 199 on Cash on Delivery and paid for a can of Deodorant and 500ml soft drink by Cheque on delivery. The e-commerce market didn’t fly for a variety of reasons.
While making a big push for e-commerce in India, Flipkart and others have had to invest in building trust, with 30 days replacements, Cash On Delivery infrastructure, and free & quick deliveries. That’s a great investment to make, which benefits the entire ecosystem. However, I take great offense to any support for discounting products to get customers. Legal ramifications aside, it is scary that local retail is losing the battle, just because they cannot match loss making capacity of large e-commerce players.
A quick back of the envelop calculation tells me that Flipkart, Amazon, eBay, Snapdeal & others can perhaps discount a $10 Billion smartphone market for 12 months by ~10%, by just investing 1/5th of their funding. Do we expect local retailers to match that? Are we okay with losing local retailers just because we want these discounts to continue? Do you believe that online retailers who sell at a discount to kill competition would play very well for the consumers when there isn’t as much competition?
I am no politician and I have earned my bread and butter from ecommerce for over a decade now. As much as I am happy to see ecommerce booming in India, I am not ready to accept a market where a monopoly emerges like this. So before we blindly cheer and support ecommerce, do stop and think about how and why you got that product cheaper than what the distributor sold it for.
Writers note: I do understand that all products are not sold at a discount. Not related, but you may want to read Why Discounts Are Suffocating
Annkur P Agarwal is the co-founder of PriceBaba. He previously founded OnlyGizmos and has also been an online retailer since 2002. You can talk to him on twitter: @annkur