First Taxmen, Now Traders Pose a Challenge for Online Marketplaces

There is never a dull day in the world of e-commerce! Just two days back, ecommerce portals were under the scanner by tax authorities. There is some more disruption they have been faced with. And this time it is the sellers themselves – if you had to sell your product at a loss, you’d probably be unhappy too.

Traders’ Association is unhappy

Since ecommerce portals usually offer heavy discounts on their products, sellers, in an attempt to keep up with the competition, lower the selling price more than they can afford to. The All Delhi Computer Traders Association (ADCTA), which is the IT and telecom product traders’ association, has advised its dealers, distributors, and suppliers, who are almost 25000 in number, to stop supplying goods to online portals if they sell any product at prices below the price at which they have originally purchased it.

“A few companies, namely FlipkartSnapdeal and Amazon etc., are selling the goods through Internet. In most of the cases, these companies are selling fast moving goods at a much [lower] price than purchase price,” a statement by the traders’ association said.

The Association also hopes the government will soon issue clear guidelines on this matter. As Swarn Singh, Joint Secretary, ADCTA says, “We are channel partners. Almost all sales in retail market happen through us. We are aware of landing price of product at customs. ADCTA has written to government agencies to investigate in the matter.

Direct Sellers are unhappy

Amway, Oriflame and Tupperware have asked Flipkart, Snapdeal and eBay to stop selling their products. These are direct selling firms, whose model does not involve a traditional retail store or a marketplace. Instead, they rely on one-on-one demonstrations and personal contact arrangements. Most direct sale companies hire distributors who make these sales.

Direct selling, estimated to have sales of about 7000 crore rupees, is one of the fastest growing industries that do not follow a retail store format. By offering heavy discounts on direct selling merchandise, marketplaces “not only divert sales from our distributors but also undermine the essence of direct selling as a proposition,” in the words of Vivek Katoch who is the Director of Corporate Affairs, Oriflame.

With the option of selling on the Internet being easily available, some errant distributors have listed these direct selling products online instead of selling them directly. This isn’t going down well with direct selling firms. As a spokesperson for Amway puts it: “Our code of conduct explicitly states that unauthorized Internet selling violates agreements with Amway and our rules department regularly monitors this activity to prevent prohibited selling. We have taken legal action in the past when these rules are violated and will continue to do so to protect customers and individual entrepreneurs – Amway business owners (ABOs).“

Ecommerce sites are unhappy

“We are a marketplace. We do not determine prices. Our sellers decide what to sell on our platform and at what price points,” an Amazon India spokesperson said in a statement, as per NDTV Gadgets report.

Since online portals only provide sellers and buyers a common interaction grounds, this seems like a bit of a far-fetched accusation. “Snapdeal.com is an online marketplace where businesses can list and sell their products across diverse categories. All sellers are screened and registered businesses. The decision on the pricing solely rests with the sellers,” says a spokesperson for Snapdeal, an e-marketplace with over 50,000 listed brands and merchants.

And we are wondering

From the customers’ point of view, the lowest selling price is what sells. Customers are bound to wonder whether retail stores are selling the same products at too large a profit. If an ecommerce site can slash its margins, why buy elsewhere? All said and done, we love finding the silver lining in every dark cloud – with a new hurdle faced and braved each day, ecommerce is gradually evolving into a riper, more mature industry.

 

 

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