 "No more warranties? Consumer goods companies talk of boycotting Flipkart post Big Billion Day")
It’s a double whammy for Flipkart, after its highly publicised Big Billion Day sales. On the one hand, the retailer is facing backlash from disappointed customers, while on the other consumer goods companies are accusing it of undercutting their margins.
According to a report in The Times of India, consumer goods companies such as Samsung, Sony and LG have stopped their sales on the website for now and are even mulling legal recourse to the “predatory pricing” moves by the company.
Those who had bought consumer goods from Flipkart may also be in for a rude shock as these firms are considering whether they should give the warranty benefits to for the products sold on the site.
“These goods are being sold through unauthorized channel partners, which is like buying from the grey market. How can we provide a service cover?” a senior executive of a company has been quoted as saying in the report.
So what is the reason for the consumer goods giants’ displeasure? They feel the “unrealistic” and “market distorting” discounts have impacted the margins of offline retailers. And consumer goods companies are dependent on brick and mortar stores for nearly 90 percent of their sales. Online is only the rest of it.
Another top official of a company has said that the discounts are only a way increase the traffic to these sites and spruce up their valuations.
According to Flipkart, as many as 1.5 million customers shopped on the day, which was much more than 20 times the usual traffic. The company as prepared for only 20 times the usual traffic, it had said in an email explaining and apologising for the debacle.
The consumer goods companies are echoing the views expressed by the offline retailers. Future group’s Kishore Biyani had yesterday told Firstbiz there is a case for anti-competitive action against online retailers.
“Laws in this country do not allow sales below cost price. This is anti-competitive. We (at Big Bazaar and other retail brands) never sell below cost price,” he had said.
The Confederation of All-India Traders, a retailers’ body, had warned that it may approach the Competition Commission of India against the discounts offered.
However, there are others who think online retailers are not engaging in predatory pricing.
A report in The Hindu BusinessLine said, citing a legal expert, that such discounts may not be called predatory.
Gautam Shahi of J Sagar, a legal firm, has pointed to an earlier case before CCI between Ashish Ahuja and Snapdeal and said that the anti-competitive body ordered that “Snapdeal is not engaged in purchase and sale of products, and operates only as a web portal for other dealers”.
If the CCI continues to hold the order, the CAIT is likely to fail in its case against the online retailers.
The bottomline is that despite all these issues raised against online retailers, ecommerce is here to stay. And it will only get bigger and better. The problems – technological and otherwise - they face now are only the growth pangs of a sunrise sector that has immense potential to deepen consumerism.
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