Indian online retailers have been wooing customers, for years, with their attractive deep discounts and predatory pricing. On April 1st, however, the Department of Industrial Policy and Promotion (DIPP) in India restricted the freedom of ecommerce companies to offer discounts to buyers.

Earlier this year, the government banned etailers from offering any discounts or cash back offers to lure customers. The DIPP’s new rules were created keeping off line retailers in mind whose sales were negatively impacted by unrestricted online discounts. The press note with revised rules by government states among other rules that, “Ecommerce entities providing marketplace will not directly influence the sale of goods or services and maintain level playing fields.” It is aimed at letting the sellers determine the price of products and not ecommerce sites that are merely online marketplaces or facilitators. According to the Economic Times, “By restricting online portals from influencing prices, the government wants to protect small and medium enterprises that are hurt due to deep online discounting.”

The new rule drastically challenges the current promotional strategies of ecommerce platforms that rely heavily on promotions. India’s top ecommerce sites Flipkart, Amazon, Snapdeal, Myntra and Paytm are known for luring consumers through massive discounts and year round ‘sales’. This influences consumers to prefer online marketplaces to offline sellers. Flipkart is known for its flagship sales event ‘Big Billion Day,’ while Amazon’s biggest sale is the Independence Day sale in August. “Cash back” is another promotional strategy that has been employed by retailers where they refund the buyer a certain percentage of the amount paid for a purchase. With the new law however, online retailers will have to do without these discounts and cash-back offers.

With the restriction on such promotions etailers are now in a quandary and have to look for better marketing and management strategies that would maintain profitability and customer retention. The ban on discounts compels companies to look for smarter tactics to increase repeat purchases and create brand loyalty from online visitors. CEO of Exclusively.com, Amit Maheshwari told The Economic Times that this is an opportunity for etailers to offer personalized services and use analytics to understand what shoppers are looking for.

Companies now need to look at value adds that set them apart from their competitors by improving services offered to customers. These may include improved product assortment, convenience of ordering, delivery timings and attractive memberships. Flipkart is considering pre-approved loans that will allow customers to shop under a ‘Buy Now Pay Later’ scheme.

Etailers could also look at examples from around the world where e-businesses have had to up their services in order to create loyalty from consumers. One of China’s largest B2C etailer JD.com offers delivery in three hours, while the Russian company Lamoda trains delivery staff to suggest fashion advise to their buyers and wait 15 minutes at the delivery location to allow the buyer to try and return the product if unsatisfied. While the international market has seen this for some time, India’s e-marketplace sector is expected to see a similar yet gradual transformation in its business models to keep up with competition.

According to a report by AT Kearney & Google , customers will soon begin to demand Value Added Services like faster delivery, hassle-free return and extended warranty. A survey conducted by AT Kearney & Google said that more than 90% of customers were willing to pay for some premium services. Etailers can attract customers by offering special services like customization, try before buying, tailoring or installation.

The increased demand along with the regulatory changes will call for growth in the number of online sellers and push players to move beyond their traditional marketing strategies.

Brick and mortar retailers for some time have been at loggerheads with online retailers. The new rules also mention that 100 per cent Foreign Direct Investment (FDI) is only permissible in Business-to-Business (B2B) online sales and not Business-to-Consumer (B2C) sales. Offline traders have accused etailers of bringing in foreign investment which is illegal.

More recently, they have brought to the fore violations by ecommerce platforms. Despite the DIPP’s FDI policies, ecommerce sites have offered discounts recently attracting the ire of offline retailers. The traders’ body Confederation of All India Traders​ (CAIT) recently filed a complaint against well-known ecommerce sites Snapdeal, Flipkart and Amazon which it said were openly flouting the new rules.

The ecommerce industry in India is expected to grow from $17 billion in 2014 to $60-70 billion by 2019. – number of online shoppers will increase to 175 million by 2020 from about 50 million now and about third of them will contribute to 68% of the total spending. Online shoppers are expected to contribute as much as 68% of the total spending by 2020.

The reports points out that, “The industry will have to rewrite the rules of the play-uncovering customer needs beyond discounts, competing and collaborating with offline retailers and designing delivery models for the future.”

It’s time for both the government and etailers to find new ways to offer the best to the consumer.


Elizabeth Raj | Blogger- Arsha Consulting

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