Discounts Are About to Be Banned on Amazon and Flipkart

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In July, India’s two biggest e-commerce companies went head to head as Prime Day and Flipkart’s Big Shopping Days offered customers deep discounts. Flipkart offered the 128GB Google Pixel 2 at Rs. 42,999, plus an extra discount of up to Rs. 11,000 on exchange and cash back. The phone normally costs Rs. 70,000.

With such incredible discounts, it is unsurprising that both companies cleaned up. Flipkart sold more than four times its daily average in revenue, and more than 2.5 times its daily run rate. Meanwhile, Amazon Prime became the most watched online content streamers in the country, with 40% mindshare during their 36-hour bonanza. Prime also saw a 35% boost in membership from Tier II and III towns.

However, as Amazon and Flipkart (which is now owned by Walmart) revelled, every other e-tailers in the country struggled. Because of their deep reserves of cash, both e-commerce giants could afford to offer ridiculous discounts. However, if the new government draft policy becomes law, this advantage could soon evaporate.

In a move that was hailed as a step forward forward for Make in India and the multiple offline retail stores that rapidly losing marketshare to the internet, the commerce ministry has proposed that such deep discounts should no longer be legal. In addition to a basic limit on price cuts, the draft e-commerce bill also suggests banning bulk buys from related sellers, barring group companies of online marketplaces from influencing prices, and restricting inventory-led models for foreign companies and majority-FDI based companies.

Famous names like Ola, Paytm, MakeMyTrip, Airtel, UrbanClap, NASSCOM, and others have been involved in a series of eight meetings over the last few months to negotiate parts of this draft policy. Flipkart too were involved in the first meeting, but were uninvited after their buyout by Walmart was rubber-stamped. However, considering the level of foreign investment in companies like Ola and Paytm, some are saying that there was still foreign influence at the meetings.

At the moment, e-commerce accounts for around 4% of the $500 billion Indian retail market. However, it is growing four times faster than offline brick-and-mortar stores. Amazon and Flipkart account for nearly three-fourths of that segment, and their influence seems to be growing.

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