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October 18, 2016
Firstpost
New Delhi, 18 October 2016
Online festival sales and the big billion day
sales are presumably happy times for customers going by the units sold
claims by online market places. However, they are creating much
heartburn for some of the white good manufacturers whose products are
being sold at prices below what they are being sold at the company
showrooms or at the retailer’s end.
The combined sales of all the three e-commerce entities in the recently
concluded five day big billion day sale spectacle was pegged at around
Rs 6,500 crore, up 20 percent over the previous year, according a
report in The Financial Express.
The Bengaluru-headquartered Flipkart pipped its nearest US-based online
retail giant Amazon’s Indian arm with 15.5 million units sold against
the latter’s 15 million units.
White goods manufacturers are now crying foul at the heavy discounts
being offered, according to The Economic Times.
It isn’t that the discounts offered by online marketplaces are really
that huge on all the products, says Nilesh Gupta, Managing Director,
Vijay Sales, consumer electronics chain. He sees online as a space that
creates a market for goods.
“Though consumers check for white goods and electronics online, the
purchases are made offline, usually. The prices of the white goods and
electronics are not hugely different to impact offline sales or
market,” he says.
Consumers don’t make large ticket purchases of white goods
periodically, says Gupta. When they do realise that if the product
brought online is not being repaired by after-sales service of the
company, then consumers will be cautious on buying these items.
It is a myth that is being created by the online marketplaces that they
offer ‘discounts’ during festival periods, says Gupta. “It is only
offered for select products and not across all product categories. On
white goods too, discounts are minimal. I see this discounting by
online marketplaces as a disturbance for offline businesses for 3-4
days and then it dies down. The online sales and discounts are a
temporary phenomenon,” says Gupta, dismissing the fuss over large-scale
discounts and sales bonanza that online marketplaces whip up
periodically. “The discounts are hardly much,” he says.
It is worrisome, though, some say that not all white goods sold come
with a warranty, while some concur that they are basically clearance
sales. Even those who claim that goods sold on the marketplaces are
goods which are not in demand are worried over potential loss of
reputation for the company. That is one of the reasons why besides the
oft-voiced complaint of vendors and retailers associations, white goods
manufacturers too are now raising the pitch against discounts offered
by online marketplaces.
Companies want to protect the price points at which their products are
sold and would not want a marketplace to lower it than what they offer
offline. “When the price of a product is knocked down on a marketplace,
for instance, it affects the brand’s perception in the consumer’s mind
and also at the dealers,” says Devangshu Dutta, Third Eyesight.
Indian rules allow for a Maximum Retail Price (MRP), but since there
are no rules yet to take action on anyone who sells below it, they can
be sold by marketplaces at below MRP under the guise of discounts and
sales, informs an analyst.
Though everyone wants to sell products at ‘exciting’ prices cashing in
on festival period sales, aggressive discounts can impact the brand’s
credibility with the trade.
The consumer runs the risk of getting a product that does not offer a
warranty and the company not willing to do after-sales service. When
that happens, the brand’s credibility goes down for the consumer as
well.
But some brands do have contracts that do not allow for their products
being sold at the contractual price.
For instance, furniture. Godrej Interio has a contract drawn up with
online marketplaces which do not allow for the latter to sell their
products at a rate below what is stipulated.
“We work with a lot of marketplaces. We deliver the products though it
is sold online through a marketplace. Marketplaces do not have an
inventory for our products. We don’t encourage a price advantage that
goes against any of the channels through which our products are sold,”
says Bedraj Tripathy, Marketing Head, Godrej Interio.
The company also does its own checks on marketplaces to ensure that
their products are not sold at prices below what has been mandated
through the contract.
(Published in Firstpost)
