In September 2013, the e-commerce industry witnessed a revolution. That month, Groupon, a leading online discount provider, was selling onion at the 1999 price of Rs. 9 a kg. The price of onion at that point was approximately Rs. 85 per kg in the retail market. The quantum of sales at 21,000 kg was not big enough to create a stir in the market.
However, the discount mania came to stay in the Indian e-commerce industry. The mania reached its height with the big billion-day sale on 6 October 2014. Flipkart decided to sell goods at impossible prices. The excitement led to confusion and confusion led to Flipkart apologising. So the question that arises is who gained from the fiasco.
e-commerce market places
In India, Internet penetration is increasing exponentially. This, many believe could lead to “the rebirth of e-commerce industry.” However, the onus lies on the e-commerce players to get the netizens to their websites.
Without doubt Big Billion Day has been able to attract reticent consumers to the different e-market places. Snapdeal ran an advertisement on the same day: “For others it’s a Big Day. For us, today is no different.” According to Flipkart’s official numbers the sale for the company was at almost a billion ruppees. Hence, the cumulative sales of the two Indian e-commerce market places touched Rs 2 billion. Not to be left behind Amazon used a cost effective strategy for increasing visits to their website: they bought the domain name bigbillionday.com. Hence, anyone who typed bigbillionday.com was directed to the Amazon website.
Clearly, the e-commerce market place seems to have gained from the whole exercise especially keeping the gifting season in mind. Sales have not only increased for the billion day but remained high even after that. The perception created from the whole exercise is, online buying is cheap.
Customers – loyal and potential
Flipkart customers were unhappy because they hardly could buy anything that day. However, consumer memory is short and the incident does not seem to have dissuaded these customers from shopping online at flipkart.com. It should also be noted that the customers faced the same kind of problem at the time of the launch of Moto-G and there was hardly any hue and cry over it.
Offline market places and traders
It is beyond doubt that this kind of predatory pricing would kill competition. The worst sufferers would be offline market places and traders. The cost structure of an offline market place does not allow the companies to provide this kind of discounting. Eliminating middlemen helps online companies deliver at lower prices. In the United States a lot of bookstores, notably the popular Borders, closed as they could not compete with Amazon.
So what is the way out for these offline companies in India? AAP leader Adarsh Shastri, who has spent considerable time at Apple, Samsung and Vodafone, has taken the cudgels on behalf of more than a lakh small time mobile phone traders so as to lobby with mobile phone manufactures on protecting the interests of small traders. However, such protectionism might not work in the face of dynamic nature of e-commerce market.
In all probability the line that proactive traditional retailers are expected to take would be to collaborate rather than compete with the online market place. For proof, see the Future Group collaborating with Amazon to sell their products online.
The e-commerce discounting melas are a reminder that e-commerce is a highly unregulated market with very few consumer protection mechanism in place. Like, it is possible that the market place increases the price a day before the discount mela and then provides discounts on the high prices. There is thus the need to have a separate proactive regulator for e-commerce markets as the industry is growing fast and needs hands-on regulations.