One would think sellers are offering unimaginable discounts on marketplaces to compete amongst one another to get maximum sales. However, that does not seem to be the case.
With price as their most potent weapon, major online marketplaces like Flipkart, Amazon And Snapdeal are trying to attract maximum customers to their base by cajoling sellers to offer maximum discounts. In doing so, they reimburse sellers who do so. Obviously, offline retailers and smaller online retailers are finding it difficult to keep pace with this strategy as they cannot afford selling at unreasonably low prices.
“P & G gives a margin of 13% for a pack of Pampers diapers. But Amazon was selling it at a discount of 28%. How is that fair? We can never match that kind of discount,” said the founder of an online site selling baby care and other products.
Although officially marketplaces claim that they don’t have any role in pricing and that they only facilitate online selling by providing sellers with their technology platform, in reality portals tend to encourage sellers to cut down on prices to attract the price-conscious Indian customers.
Several merchants are troubled by marketplaces to reduce prices.
“The first level of price control happens when the seller uploads his catalogue,” said one seller who sells products on Amazon, Snapdeal, Flipkart and eBay. He said he is urged by each marketplace to compare prices of his products and accordingly offer the lowest price possible.
When marketplaces run across-the-site or category-wide discounts, the applicable discounting cost is borne as one of the following:
This strategy followed by many e-commerce players is called predatory pricing and is creating ripples of discontent across the e-commerce industry.
“I had listed a wi-fi adapter for Rs 399 on Snapdeal which they sold for Rs 299, but I got my price,” said one seller dealing in electronics.
Industry experts say that discounts of this level are legal as it is meant as marketing to get maximum customers. However, there could be a problem if it goes beyond.
“We are against the philosophy of selling products at loss,” said Saurabh Malik, business head at Indiatimes Shopping. According to him, the portal co-funds some discounts but most are funded by sellers themselves.
Amazon reimburses merchants. When it introduced its Marketing Promotion Program in 2013, an email to sellers mentioned, “Amazon will pay for the promotional activities carried by you only for those orders wherein the customers have purchases those items under promotion within the validity of the promotion period at the specified discount price.
Flipkart adjusts the commissions payable to sellers. “In some promotional campaings, we either reduce or waive our commissions to allow sellers to offer better prices to customers. However, we do not reimburse sellers as this is not in the spirit of a true marketplace,” said Ankit Nagori, VP (marketplace) of Flipkart.
Offline retailers and smaller online retailers obviously want a minimum operative price to be maintained as its difficult for them to keep up with the discounts. Predatory pricing affects others retailers.
Well, if you are selling on these marketplace you obviously get your returns as they reimburse the slash in prices.
However, if you are on your own, you need to try and score above them with other aspects like product differentiation (offer what no one else does), delivery (you can try to deliver within an hour or two to customers who are in your same city), value-adds (loyalty services, redemption vouchers for offline stores like coffee shops or similar, gifting opportunities at no additional cost, etc.)
After dwindling with her family business, into travel and hospitality, for more than 3 years, Pooja Vishant found her true love in writing. Happy-go-lucky and cheerful, she loves pink; so pink is the way to go if you want to get into her good books. The Associate Editor keeps track of even a leaf that has moved in the ecommerce world!
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