Government of India is punishing e-commerce firms for discounts.

Say bye to online discounts this year

Government of India is providing level playing field for the local players. It aims to stop deep discounting and round the year discounts.

Brief: Unhappy Christmas

• E-commerce firms with FDI ( Amazon, Flipkart, Paytm Mall) can not sell merchandise through their subsidiaries or companies, in which they have stakes.
• No more exlcusive deals with brands. Amazon has with Oppo.
• Government will set up an investigative arm under enforcement directorate to check the malpractice.

Why?

• Government wants to stop predatory pricing and deep discounting.
• It wants to give level playing field to local players such as Snapdeal, Ajio, Paytm and Shopclues.
• Independent retailers will get a boost, as they could not offer discounts or exclusive deals.

Is it good or bad?

Short term:

• It’s good for small players, without VC funds.
• Small e-commerce businesses get a window to fight back.
• Amazon and Flipkart have a maize of subsidiaries and joint ventures, which sell on their marketplaces. They can’t.

Long term:

• Sudden policy tweaks are not good. Investors may not like it.
• Direct meddling by the government is license raj, which encourages corruption.

NDBJ insight:

• Pricing and scale are two big weapons of big e-commerce companies. There are other ways to fight back such as strategy, branding and customer care.
• With policies and infrastructure to grow small businesses ( warehouses, access to capital, training, contract laws, and pro active government agencies) government will be able to stop predatory pricing and deep discounting.

Got more time?

• Mint: Big players will find a way out.
• Mint: A regulator for e-commerce
• ET: Winners and losers
• ET: New rules for food delivery companies
• WSJ: US may push back