Flipkart asks cos to bear discount costs

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NEW DELHI: Brands selling on online marketplaces of Flipkart Group have been asked to bear the cost of deep discounts as a result of e-tailer’s parent Walmart tightening compliance norms in the wake of the government’s Press Note 2.

The move comes against the backdrop of sales of several categories on online marketplaces being hit severely after the government last year spelt out amendments to the rules relating to FDI in e-commerce. The clarifications that were meant to discourage inventory-led business models allegedly followed by foreign e-commerce companies, led to a drought of discounts, which in turn forced most large sellers on these online platforms to resort back to selling goods at maximum retail price. In several cases, consumers have been found to move back to offline retail stores as these retailers offered more discounts than their online counterparts.

“We have been approached by alpha sellers on these platforms to renegotiate deals. They have asked us to bear the cost of discounts because stocks aren’t moving like they used to when there were huge discounts available on online marketplaces. Most categories have been hit badly due to lack of discounts. Offers were one of the most important reasons why e-commerce companies could drive consumption,” said a senior executive at a popular fashion brand.

While a Flipkart Group spokesperson did not reply to an email from TOI, senior executives at other manufacturers said they are in discussions with alpha sellers on Flipkart on how to best mitigate the impact of Press Note 2 on sales of major FDI-backed e-tailers. Senior Walmart executives had earlier told TOI that Flipkart is currently fully compliant with the new rules in FDI in e-commerce.

“Most probably, we will have to forego a part of our profits to bring back shoppers to these platforms,” said a senior executive at a large appliances company.

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