E-commerce companies such as Flipkart, Amazon, Shopclues and Snapdeal, among others, are allegedly resorting to “unscrupulous practices” to boost sales, say industry experts. They say that this is because investors have started to put pressure on these players to produce better profit margins. Amazon, Flipkart, Paytm and Snapdeal, among others, kicked off mega sales on Saturday.
Experts assert that e-commerce companies have adopted several “underhand” tactics such as price manipulation and increased commission to keep their revenues intact, following the recent steep cuts in the valuations of such companies. Last year, US financial service giant Morgan Stanley devalued India’s e-commerce market leader Flipkart by 27%.
“Though investors have become more cautious about the profit margins, discounts still remain the crucial factor to push sales online. What we see now is ‘intelligent discounting’, unlike three-four years ago. E-commerce firms are going for perceived discounts than actual discounts to attract customers,” said Pragya Singh, associate director of retail and consumer products at Technopak.
“Intelligent discounting” or “perceived discounts” is a tactic used by online market players to give an impression of offering “great deals” to customers. The firms allegedly increase the list price and offer a discount on that, while in reality, the actual selling price remains the same.
The Sunday Guardian found that while in Amazon the price of a Philips trimmer (QT 4005/15) was marked at Rs 1,795 against the actual MRP of Rs 1,695, on Flipkart, a Panasonic single door refrigerator (190L) was marked at Rs 15,900 against Rs 15,200 on the company’s home website.
“Reputed vendors mention the MRP, but there are a few sellers who do not. Some even quote the prices above the MRP. Price manipulation is in contravention of the ‘legal metrology packaged commodities rules’. For instance, Ahujatraders in Amazon is selling Lakme Eyeconic Kajal for Rs 240 against the actual MRP of Rs 180,” said Pritee Shah of Ahmedabad-based Consumer Education and Research Centre (CREC).
Countering the claims of price manipulation, an industry insider told The Sunday Guardian on the condition of anonymity, “By and large, discounts are offered by the seller. Price manipulation is not allowed and all the leading market players take swift action if any vendor is found doing so.”
The e-commerce giants are further troubled by the increasing number of complaints regarding sellers shipping out fake and counterfeit products to customers. Earlier this week, while a consumer lodged a complaint at a consumer forum about receiving a stone instead of a Redmi phone from Flipkart, another customer claimed to have received defective Puma shoes from Amazon.
Pritee Shah recently moved an online petition at change.org where she alleged that she received a fake product from one of the sellers listed on Amazon.
“I received a fake Lakme Eyeconic Kajal (pack of two) from Amazon a couple of months ago. Both the manufacturer, Hindustan Unilever Ltd (HUL), and Sublime, a seller on Amazon, admitted that the product was a fake. I took up the issue and realised that over 340 women had received the same fake product from Amazon,” alleged Shah. She further said that Amazon took note of the issue and agreed to give the product from this particular vendor free of cost to all 340 women.
Reflecting on its policy to deal with such instances, an Amazon India spokesperson told The Sunday Guardian, “Sellers are mandated to sell only genuine and original products on Amazon.in and they sign an undertaking to do so. If it is brought to our notice that sellers are using our marketplace platform to sell fake or counterfeit products, we work with the sellers to bring such products down from our website. There have been several instances where sellers have been delisted as well.”
Flipkart, Paytm and Snapdeal did not respond to queries from The Sunday Guardian.
Speaking to this newspaper, an e-commerce marketing strategist revealed that the advent of “data crawling”—a process used by apps that compare the best deals across different platforms—has made discounting mandatory to attract traffic. Higher the discounts, better the visibility. The burden of these discounts has been passed on to the vendors.
“What they (e-commerce marketplaces) used to shell out from their pockets earlier, they are now squeezing from the sellers. What costs them Rs 50-60 to ship a product, they charge Rs 500 or more for that from sellers and a portion from consumers as convenience charge,” said Alok Singh, operations manager, e-commerce, ultra media and entertainment.
Another industry insider, who has worked across the value chain, told this newspaper that the burden of the sales season is borne by the sellers, as they are forced to participate in the event, or they lose out on the visibility of their products.
“Sales are shoved on to the vendors. Firstly, they have to reduce the price to the suggested price and then they are asked to pay for their product to show up. And the competition is so stiff that even if one denies, two others will agree,” the insider said.