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Offline retailers accuse Amazon and Flipkart of deep discounting, predatory pricing and undercutting

How is it that companies like Amazon and Flipkart continue to sell at discounted prices despite being in heavy losses, asked Praveen Khandelwal, national secretary-general of Confederation of All India Traders (CAIT) at a panel discussion organised by the Competition Commission of India (CCI) on August 30. “Venture capital and private equity firms are least interested in the business model of companies. They want to increase the market value of a company and then sell it off. That is also the story of e-commerce companies in India,” Khandelwal said. He also alleged that while associations like his have been asking for an e-commerce policy, “these companies have stalled it”. “There’s just no regulatory mechanism to help us,” he noted.

The panel was discussing the advent of e-commerce in India, and how small and medium retailers have been feeling the pinch of the sector’s boom.

Khandelwal also said, “Who are the first 10 sellers on an e-commerce portal? Check it. These [sellers] are offshoots of that particular e-commerce company.” He directed this question towards Amazon’s senior corporate counsel Rahul Sundaram, who defended Amazon’s business strategies and said that Amazon was a pure play market, didn’t prioritise sellers, and didn’t decide prices of products on its platforms.

Khandelwal along with Kush Agarwal, a member of All India Online Vendors Association (AIOVA) argued fiercely against e-commerce companies in India and grilled Amazon’s Rahul Sundaram over the company’s practises. Snapdeal and VMart representatives remained comparatively quiet across the panel, making points sporadically.

Against deep discounting and predatory pricing, not e-commerce: Khandelwal

Khandelwal added that his association was not against the idea of e-commerce in India while admitting that e-commerce has helped traders to reach new markets. However, he pointed out that the biggest problems are predatory pricing and deep discounting. He recounted that he once called a trader friend who was selling a smartphone for a much cheaper price on an e-commerce platform, while the price on his shop was a bit higher. “I asked him, is there dual pricing?” said Khandelwal, adding that the trader didn’t know that his product was being sold at that price online. “How are the costs so low online?” he asked.

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Amazon and CAIT spat over ‘small traders’

Sundaram said that Amazon has over 500,000 sellers which mostly include Medium and Small Enterprises (MSMEs). He also said that tribal artisans and local craftsmen have used the platform to reach a wider audience without having to worry about the logistics, noting that Amazon’s 57 warehouses in India have only helped small traders. Sundaram’s response riled Khandelwal, who objected the over-usage of the phrase ‘small traders’, saying that “we are not small…don’t call us small please”. Mohindroo jumped in and demanded Amazon for a breakup of the proportion of sales that the company did with its top few sellers, versus the rest of the sellers on the platform.

Is it okay when Indian companies like Reliance Jio undercut offline retailers, asks ICEA

“Is it okay for Indian capital like Reliance Jio and VMart to undercut [retail traders] and not when foreign capital does it?” asked Pankaj Mohindroo, Chairman of India Cellular & Electronics Association (ICEA) .  He further said that only because Reliance can sell a smartphone which is actually worth Rs 2500 for Rs 500, doesn’t mean it is correct. “It is unfair,” he added. VMart’s chairman and MD, Lalit Agarwal, didn’t respond to Mohendroo’s question.

Brick and mortar smartphone retailers the group that Mohindroo’s association represents have found it difficult to compete with mobile phone prices on e-commerce platforms, he said while talking about deep discounting.

Flipkart and Amazon are the bad fish: AIOVA

Kush Agarwal of AIOVA said Flipkart and Amazon were the bad fish, and should have “followed the culture of India”. “E-commerce isn’t the future of India. It was the past, it is the present. Not the future,” Agarwal added. Talking about undercutting, he said that “pseudo marketplaces like Amazon and Flipkart” were charging sellers a amount of money and were then undercutting them by launching their own products.

E-commerce platforms should obtain registration from govt: Khandelwal

Khandelwal said that the following ideas should govern e-commerce in India:

  • No predatory pricing and deep discounting
  • E-commerce companies should be thoroughly regulated
  • There should be an e-commerce ombudsman to address problems related to the sector
  • Enforcement Directorate and RBI should also take note of offline retailers’ complaints against e-commerce companies
  • Every e-commerce portal should have to obtain a registration certificate from the government

CAIT has launched a campaign to ‘digitise’ offline retailers

Khandelwal said that CAIT has launched a campaign to digitalise about 70 million offline retailers, wherein every retailer will have her/his own website. This has been done in conjunction with the Ministry of Electronics and Information Technology’s (MEITY) Common Service Centres (CSC), HDFC Bank and Mastercard.

India shouldn’t become a digital colony like Europe: Snapdeal

Snapdeal’s Pawan Kaul talked about Press Note 2 and said that enforcement remains a problem. “We are still not clear on how it [Press Note 2] will be enforced,” said Kaul. He also added that “India should not get converted into a digital colony like Europe since we still have entrepreneur blood here”.

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