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India's e-commerce 'slaughterhouses'

News, 05 October 2016

NEW DELHI: Even as India's online marketplaces are boasting of the volume of transactions generated in the current wave of festive sales, questions are being asked about whether their marketing violates government guidelines.

The Department of Industrial Policy and Promotion (DIPP) rules prohibit marketplaces from offering discounts and cap total sales originating from a group company or one vendor at 25%, while also stating that marketplaces cannot influence pricing.

"But that is exactly what these marketplaces are attempting to do by advertising through multiple channels and offering discounts and freebies," argued FirstPost.

The DIPP disagrees with that assessment, however, with a source telling the Economic Times: "There is no problem in giving advertisements – it is part of the business.

"They are also putting disclaimers that these discounts are extended by vendors," the source added.

But smaller vendors don't quite see it that way, with one describing online marketplaces as "slaughterhouses" because of their pressures on pricing.

And Kishore Biyani, Group CEO, Future Group, agreed: "They [small vendors] are being impacted with these discount offers which will ultimately kill their businesses," he said, adding that the government should understand how its guidelines are being ignored.

A particular pain point for traditional retailers such as Future Group is that brands are only offering products at a discount online and not offline.

"This only goes to show that marketplaces have a direct control over inventory," maintained Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT).

"This is a clear violation of the guidelines," he said, adding that he would be writing to the Prime Minister and the Finance Minister about the issue.

Amazon has reported seven times more transactions than its usual daily rate, while Flipkart claimed to have sold 800,000 phones on Monday alone.

Data sourced from FirstPost, Economic Times; additional content by Warc staff