Big Billion Day sale has backfired Flipkart

The block­buster Diwali sale on Flip­kart that gave it $100 mil­lion in sales in only 10 hours has back­fired Flip­kart. Flip­kart is now fac­ing scruti­ny of the gov­ern­ment, based on com­plaints from traders over under­cut­ting prices and adverse­ly affect­ing com­pe­ti­tion. A probe by the Com­pe­ti­tion Com­mis­sion of India (CCI) is not ruled out.

This comes soon after Flip­kart failed to please mil­lions of Indi­ans on the much-adver­tised ‘Big Bil­lion Day’, though co-founders Sachin Bansal and Bin­ny Bansal were quick to send an apol­o­gy to buy­ers, who were angry over tech­ni­cal glitch­es and price anomalies.

But the apol­o­gy of the Bansals (not relat­ed to each oth­er) might not be enough, as Com­merce Min­is­ter Nir­mala Sithara­man has indi­cat­ed the gov­ern­ment is watch­ing. “We have received many inputs. Lots of con­cerns have been expressed. We will look into it,” Sithara­man told the media. She added the gov­ern­ment would soon make it clear, after study­ing the mat­ter, whether a sep­a­rate pol­i­cy or clar­i­fi­ca­tion was required for e‑commerce.

Indeed, an e‑commerce pol­i­cy has been in the process for long, even as the sec­tor, pegged at around Rs 18,000 crore, has been grow­ing at a rapid pace and is expect­ed to touch Rs 50,000 crore by 2016. The only clar­i­ty that has been pro­vid­ed by the gov­ern­ment on the sec­tor is that for­eign direct invest­ment is not per­mit­ted. How­ev­er, e‑commerce play­ers have tak­en advan­tage of the reg­u­la­to­ry silence on mar­ket­place (a for­mat of host­ing retail­ers on a tech­nol­o­gy plat­form) to attract for­eign invest­ment. Even inter­na­tion­al e‑commerce lead­ers like Ama­zon and eBay have used the mar­ket­place route to enter India.

Asked to respond to Sithara­man’s obser­va­tion and traders’ con­cerns, a Flip­kart spokesper­son said: “We are an e‑marketplace, where sell­ers decide the price, and only they can change the prices in the sys­tem. They sell direct­ly to buy­ers with­out step­ping out of their workplace.”

Though it is Flip­kart and its ‘Big Bil­lion Day’ that seem to be under the lens, oth­er e‑commerce play­ers like Ama­zon, Snapdeal and Myn­tra (now acquired by Flip­kart), too, are on a dis­count spree, at times offer­ing prod­ucts at prices that even deal­ers can­not afford.

The scruti­ny on Flip­kart, and per­haps some oth­er e‑commerce play­ers, has been trig­gered by traders who are promi­nent in brick-and-mor­tar retailing.

Future Group Chief Exec­u­tive Kishore Biyani has attacked e‑commerce play­ers for sell­ing prod­ucts below man­u­fac­tur­ing prices. The under­cut­ting of prices was meant to destroy com­pe­ti­tion, Biyani said.

Oth­ers, includ­ing the Con­fed­er­a­tion of All India Traders (CAIT) and the new­ly formed Online Ven­dors Asso­ci­a­tion of India (OVAI), want a reg­u­la­tor to look into the mat­ter of price under­cut­ting by e‑commerce play­ers in the fes­tive sea­son. Traders are a large sup­port­er base for the rul­ing Nation­al Demo­c­ra­t­ic Alliance government.

Even as there are sug­ges­tions that CCI should take up the mat­ter as it deals with under­cut­ting and preda­to­ry pric­ing, there is no deci­sion yet on that. CCI Chair­man Ashok Chawla said the com­mis­sion would take up the mat­ter if and when there was a com­plaint linked to preda­to­ry pricing.

The objec­tive of CCI is to pro­mote com­pe­ti­tion and it gets into the pic­ture only when there is a com­plaint on preda­to­ry pric­ing. But it is learnt that in the past, CCI could not pro­ceed in a sim­i­lar case relat­ed to e‑commerce com­pa­ny, Snapdeal, as it was not a sell­er itself but was only pro­vid­ing a plat­form where the sell­er and the buy­er could meet.

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