KOLKATA: New rules governing online deals and a more measured approach to funding by investors are forcing India's previously high-spending e-commerce businesses to reassess their strategies.
Since it is no longer possible to use venture capital investment to underwrite promotional offers, leading online marketplaces Flipkart and Snapdeal have instead asked top brands to run campaigns promoting deals and products, just as those brands currently do for bricks-and-mortar stores.
"Brands are at liberty to discount products and hence any such deals and marketing campaigns done by them will not violate the rules," the head of one leading domestic consumer electronics maker told the Economic Times.
The e-commerce sites have, naturally, first approached brands in the top-selling online categories: consumer electronics, mobile phones and apparel are thought to account for as much as 90% of their business.
But for the brands in these categories, offline sales still dominate and many are wary of upsetting their most important retail outlets.
"We are yet to decide since we don't want to make any move which antagonises offline channels, which account for 97% of our sales," said the marketing head of a top white-goods maker.
But Haier, the Chinese white-goods brand, was more positive, suggesting the end of predatory pricing tactics meant manufacturers could now see it as an additional sales channel and provide appropriate support.
"Brands and e-commerce firms will work closely since the issue of crazy prices does not exist anymore," said Eric Braganza, president, Haier India.
The head of a domestic mobile phone maker pointed out that e-commerce accounts for nearly one third of smartphone sales in the country, so he would be prepared to invest in marketing for the platforms.
As well as the restrictions imposed by new government rules, e-commerce businesses have also experienced a reduction in the money available to them from investors concerned at the sums being burned on promotions while the companies had yet to report profits.
Data sourced from Economic Times; additional content by Warc staff