Deep discounting by e-tailers may not stop: India Ratings and Research

India Ratings and Research (Ind-Ra) has said that the recently introduced e-commerce policy is unlikely to change the discounting model of online retailers in the near-term. The policy is a step towards regulating the e-commerce industry and the traditional offline retailers are unlikely to benefit as the policy is directed towards defining and limiting the scope of operations of e-commerce business.

The policy aims to define and ring fence the marketplace operation activity of e-commerce players and to distinguish the scope of marketplace and inventory-based model as the foreign direct investment (FDI) allowed for both the models is different. As per the new guidelines, marketplace e-tailers cannot own goods, act as facilitator between buyers and sellers and not influence the selling price of the goods. This has been done by the ministry to discourage the deep discounting strategy that has been adopted by the e-tailers.

So far there is no clarity on the policy and this will help e-tailers to exploit the loopholes or adopt innovative strategies to keep the deep discounts on. And this will go on till the time a stringent framework is adopted to prohibit and bring a level-playing field with offline retailers.

Ind-Ra assures that the policy tries to safeguard customer interest by introducing additional disclosures. It is also a move to empower the manufacturer/seller towards positioning their brands, thus addressing concerns over deep discounts offered by online retailers which are affecting their brand’s reputation. However, once a comprehensive policy is introduced and successfully implemented, e-commerce could transform into a more mature market.