Ban on Marketplace discountsAavriti Jain, co-founder, Dhora, a Jaipur-based seller of designer clothes, leather goods and semi-precious jewellery, has had a terrible summer so far. Orders on the portals Dhora sells, such as Amazon and Flipkart, have dried up. Not long ago, Dhora used to ship 60-70 packets a day. Now, many days go without orders.
Sashi Somavarapu, founder and CEO,, a seller of baby products across e-commerce platforms in Hyderabad, is also having a torrid time. “People are buying, but prefer essentials over discretionary items,” he says. Orders for items like diapers and napkins but those for strollers and baby clothes have declined, with buyers preferring to visit stores to shop.
Several sellers across the country have noticed this change in buyer behaviour in the last two months. And this is across categories electronics, clothes, designer wear, kitchen items and baby products.
It is not hard to see why. On April 1, the government disallowed deep discounts, insisting that portals can’t dip into their cash reserves (read venture money) to subsidise products. Discounts if any will be at the discretion of manufacturers. That means Samsung and Micromax can offer discounts but Paytm, Snapdeal, Shopclues, Amazon, Flipkart etc cannot.
Deep discounts were the USP of these websites and if they were discontinued, customers would rather go to a physical store that not only offers discounts but also allows them to check out items directly. Online shopping in India, at about $10 billion in the total retail business of about $450 billion, is growing 10-12% annually. Out of the 400 million internet users about 40-50 million shop online while regular buyers would be less than 10 million.
The growth was largely fuelled by discounts. “Discounts created online shopping,” says Rajat Kohli, consultant, market expansion, Zinnov Consulting.
A large number of those shoppers seem to have gone into hiding. The business of online sellers of electronics has dropped by around 30% since April this year while that of fashion and shoe e-tailers has fallen 40-50%. Sanjay Thakur, president, eSellers Suraksha Forum, says, “Discounts and volumes have an inverse relationship.”
Dinesh Chopra, director, Softex Surya, a Nehru Place, Delhi-based retailer of computers and electronics says sales have fallen 30% since April. “Now price (of ecommerce websites) is aligned to retail outlets and portals are also focusing on fast selling items rather than display unique items on landing pages.”
Chopra thanks his lucky stars that he didn’t shut his store in Nehru Place. “In recent weeks I have seen increased footfalls and conversions.” Earlier, he says, people came to see products, compare prices with online and buy from portals as they were cheaper. Now with similar prices online and offline, shoppers are flocking back to buying offline.
The government order on discounts has in effect created a level playing field for online and offline retailers.
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Source – ET Retail