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Flipkart asks merchants to bear 60% of discounting

Online marketplaces like Flipkart and Amazon say they do not influence pricing on their platforms since the government’s rules do not allow them to do so.

Mar 20, 2018, 11.23 AM IST
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The break-up of the incentive offer will be that the seller will burn 60% and Flipkart will burn 40%
(This story originally appeared in on Mar 20, 2018)
BENGALURU: Attempting a shift from the typical practice of funding a majority of discounts on its platform, homegrown e-commerce major Flipkart is asking sellers to foot a big chunk of the incentives during sale events, according to a recent communication sent by the e-tailer to its merchants, a copy of which was reviewed by TOI.

Online marketplaces like Flipkart and Amazon say they do not influence pricing on their platforms since the government’s rules do not allow them to do so. But most players work around guidelines to offer discounts in order to drive sales. A major reason for these companies investing heavily in their India entities is attributed to the monthly costs that are allocated for discounting.

“The break-up of the incentive offer will be that the seller will burn 60% and Flipkart will burn 40%,” a note to various third-party merchants said, explaining the share of costs that have to be incurred by the merchant during sale events.

One of the sellers told TOI that Flipkart asking vendors to share a larger part of the discounting cost is a new and emerging trend.

An email sent to a Flipkart spokesperson on this matter did not elicit a response.

Discounting is an integral part of the Indian e-commerce industry as it helps get users to buy online at a cheaper rate compared to offline prices. Over the past few years, the pace of discounting has increased because the fight between Flipkart and Amazon has intensified.

As reported by TOI, Amazon is now bringing new policies for sellers starting April 19, which will see various cuts in commissions. This is being seen as a move to make sure third-party merchants don’t leave the platform and go to rivals.

According to an industry executive, the latest attempt from Flipkart will see further cost rationalisation of products being sold by thirdparty merchants. Sellers, who are closely associated with Flipkart and contribute a majority of sales for the company, will continue to offer steep discounts. These sellers are large in size, which makes it easier for them to have adequate working capital to feed the discounting strategies.

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