Amazon, Flipkart ask brands to take the lead on ‘discounting’

• E-commerce giants Amazon and Flipkart are working to end price distortions in the market.
  
• They have reached out to various brands to set a negotiated and pre-determined price---this is technically called market operating price.
  
• The price guarantee clause provides the seller with the liberty of matching the price if they are available at a lower price on another marketplace.
  

Heavy discounts on big brands may go into a slump as e-commerce giants Amazon and Flipkart are working to end price distortions in the market. This is want to comply with the strict rules enforced on foreign owned online marketplaces by the government, reported the Economic Times.

This will signal price stability in the deeply competitive e-commerce marketplace.

As per the report, Walmart-owned Flipkart and global giant Amazon have reached out to various brands to set a negotiated and pre-determined price---this is technically called market operating price they offer the sellers. The brands will have to certify that they themselves will bear any discounts beyond a limit.

Marketplace and sellers will not be affected in any manner by this, an executive aware of the proceedings told ET.

Matching the Price

A price guarantee clause between the seller and brand provides the seller with the liberty of matching the price if products are available at a cheaper rate on another marketplace. And, the onus will be on brands to reimburse the difference in price by issuing a credit note.

Earlier, sellers had to willfully drop prices to remain competitive.

The process of maintenance of market operating price, discounts and credit notes have also been automated to be in line with the new foreign direct investment (FDI) norms introduced earlier this year.

Though India allows 100% FDI in e-commerce marketplaces, they can operate only as platforms connecting buyers and sellers. They cannot influence the market price of products, which turned into a heavily debatable issue. Brick-and-mortar retailers alleged that heavy discounts are being used indirectly to influence the market price of online platforms.

This new system has already been implemented in consumer electronics and smartphones, along with others.

This latest move by multinational e-tailers suggest that they too are serious about the rules, after the government proved that they are serious about implementing them.

In May, the government banned Flipkart from selling products of the smartwear GOQii after the latter alleged deep discounting. The Ratan Tata backed company run by Vishal Gondal approached Department of Promotion of Internal Trade (DPIT) and Competition Commission of India with complaints, leading to the government taking prompt action.

All in all, those looking to go online for ‘cheaper’ price points will be disappointed.

SEE ALSO:
Flipkart's continued deep discounting could mean more trouble in the future
Flipkart is wooing sellers with a collaboration that will help them file their taxes online