Flipkart, Amazon get ready for festive face-off; profit margins reduced to accommodate discounts

Editor | Sep 15, 2020

A festive season without discounts won’t have many takers. And Indian ecommerce companies understand that. But with FDI restrictions on offering huge discounts and big brands’ reluctance to deplete the value of their brand, etailers had to find a new way to entice consumers. With peak shopping season just around the corner, online marketplaces have found what they were looking for.  

Letting go of profit margin and commission for discounts

Biggies like Flipkart and Amazon have approached brands directly and requested them to reduce their profit margins. In return, marketplaces too have agreed to reduce their commission by 50% so that there’s enough room for discounts.

Big electronic brands such as Samsung, LG and Sony are not going to encourage online discounts on their products. Therefore, etailers are relying on online-focussed electronic brands like Sanyo, Onida, BPL, and TCL.

An executive from one television brand that etailers have approached said, “Since the marketplaces cannot burn money on mainstream brands now due to a direct business relationship, they are placing their bet solely on the online exclusive or focussed brands this festive season to drive their category volumes. Even during the just concluded Independence Day sales, the focus has been on these brands.”

It is a win-win situation for online marketplaces and online-focussed electronic brands. During the festive season, besides fashion products, large appliances and smartphones sell really well. And the bigger the discount, the more it sells, especially in tier 2 & 3 cities.

Brands like Panasonic, BPL, TCL and Onida are working with the online marketplaces to come up with hard-to-ignore offers during the festive season instead of burning money on advertising and promotions.

No dearth of funds

Amazon India has deep pockets, thanks to Jeff Bezos. The American etailer recently injected $63 million into its logistics arm as part of its festive prep. Its food business too would be ready to roll by Diwali.

But this time around Flipkart is also flush with funds thanks to the $2.5 billion investment by Softbank. The home-grown etailer has laid out clear plans to utilize this money to fight against Amazon.

While speaking about the 2017 festive season, Flipkart’s senior director Smrithi Ravichandran stated, “With every festive season, Flipkart has expanded the e-commerce horizon in India, bringing to existing and new customers the widest product range at best prices. This year is going to be even more delightful for customers, because along with existing affordability programmes, we’re making new additions like extended warranties and buyback guarantee.”

While Amazon is counting on its subscription service Prime, Flipkart is looking to capture buyers’ attention by offering new schemes. The Bansals-led company also revamped its large appliances category ahead of the festive season. Push for private labels too have increased.

With each passing day, the festive war between Flipkart and Amazon would intensify even further.


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