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September 3, 2025
Aakriti Bansal, Medianama
3 September 2025
The Goods and Services Tax (GST) overhaul simplifies India’s tax structure and lowers prices for many goods. However, for e-commerce sellers, the change arrives at the worst possible moment. Platforms and sellers must adjust billing systems, invoices, and inventory records just as the festive season begins.
The festive period drives the highest order volumes of the year, and even minor disruptions in invoicing or compliance ripple through the system. Refunds get delayed, seller–platform relations strain, consumers face frustration, and penalties under GST law escalate. Moreover, the episode shows the fragility of India’s e-commerce compliance infrastructure.
Larger sellers can rely on manpower and technology, but smaller businesses remain disproportionately exposed. Platforms, meanwhile, cannot act as neutral intermediaries when their invoicing systems directly control seller compliance. The question now is whether the government, platforms, and sellers can move fast enough to make structural reforms without turning them into seasonal flashpoints.
What’s the News?
The GST Council, chaired by Finance Minister Nirmala Sitharaman, is meeting today and tomorrow (September 3–4), according to a report by Hindustan Times, to decide on a major overhaul of India’s tax system. The timing has already unsettled e-commerce. Platforms like Amazon, Flipkart, and Meesho are holding back on announcing festive sale dates, while sellers report uncertainty about how to handle inventory already billed at old rates.
Shoppers are delaying big-ticket purchases such as smartphones, televisions, and appliances, creating a visible slowdown in demand. Retailers are carrying higher stock levels, waiting to recalibrate pricing once the Council clarifies the new slabs. The pause comes just before the festive sales period, which typically contributes about a quarter of annual revenues for e-commerce platforms.
What the GST Reforms Are
The government has proposed collapsing the four-tier GST structure of 5%, 12%, 18%, and 28% into two slabs of 5% and 18%. A new 40% tier would apply to luxury and sin goods, replacing the existing compensation-cess mechanism.
If the Council approves, several categories will see rate changes. White goods such as washing machines, air-conditioners, smartphones, refrigerators, and televisions would move from 28% to 18%. Small petrol cars and motorcycles would also shift from 28% to 18%. Essentials including ghee, nuts, namkeen, packaged drinking water, and medical devices would drop from 12% to 5%. Everyday consumer products like toothpaste, shampoo, soap, and ready-to-eat foods would also move into the 5% bracket.
The 40% tier would target high-end cars, premium electric vehicles, tobacco, and pan masala. States have pushed back, warning of revenue losses, and discussions are underway on whether higher levies on luxury items or cess surpluses can offset the shortfall.
Implementation Challenges
Satish Meena of Datum Intelligence, a market research firm, flagged the absence of a transition window as “very tricky.” “Everyone wants to make the change because this is the peak sale time,” Meena explained. “But the challenge is how it will be implemented for goods already in warehouses. Once inventory has moved from the company to the warehouse under the old GST, how will you pass on the benefit to the customer?”
Devangshu Dutta, chief executive of Third Eyesight, a retail consulting firm, pointed to similar risks. “Sellers will need to rapidly adjust pricing strategies and inventory details, keeping in mind that the festive season is upon us,” Dutta explained. “One would hope that the changeover of rates doesn’t create supply unpredictability in this critical season.”
Abhishek A. Rastogi, founder of Rastogi Chambers, a law firm specialising in indirect tax and regulatory matters, warned about compliance fallout.“From a compliance perspective, the biggest challenge will be ensuring real-time alignment between product listings, tax rates, and invoices generated. Even a minor mismatch in billing, particularly during the high-volume festive season, could result in serious exposure,” Rastogi said.
Impact on Smaller Sellers
Experts agreed that smaller sellers carry the heaviest burden. “Larger sellers with manpower and technology will cope faster. Smaller sellers will face particular challenges,” Meena noted.
Dutta explained why smaller businesses feel the squeeze. “Businesses of all sizes face the burden of compliance and accurate reporting, but smaller businesses feel the impact disproportionately as their management resources are far more limited. Often it is the owner-manager, the most critical human resource in a small business, whose time gets sucked into ensuring the changes go through smoothly,” he said.
Moreover, Rastogi advised small sellers to act defensively. “Smaller sellers must ensure they maintain proper records of their communications with platforms, raise tickets on billing mismatches, and document tax advice received. Such proactive record-keeping will protect them if litigation arises later. They should also consider contractual safeguards when signing with platforms,” he said.
Platforms Under Pressure
Platforms also operate under strain. Meena pointed out that festive sales remain unannounced. “Typically, the sales should be in the week of October 13–14, or the following week. That has not been announced till now because of this GST issue,” he said.
Dutta argued that platforms must step in to steady sellers. “Sales, inventory, and return reconciliation is an ongoing issue and potential point of dissatisfaction among sellers. To avoid adding to this, e-commerce platforms need to provide enhanced seller support to smooth out the turbulence during the GST changeover,” he said.
Rastogi underlined that platforms share liability. “Legally, the burden to discharge GST liability lies on the seller. However, given that invoicing systems are often managed by e-commerce platforms, there is a shared responsibility to ensure the correct GST rate is applied. Any platform-level error that causes sellers to become non-compliant could become a contentious issue,” he explained.
He also laid out remedies. “Sellers impacted due to platform-level glitches can seek remedies under contract law and indemnity clauses in their agreements with the platform. They may also explore legal recourse if non-compliance is triggered without their fault. Ultimately, disputes of this nature will test how liability is apportioned between sellers and platforms,” Rastogi mentioned.
Consumer and Market Effects
The uncertainty already shapes consumer behaviour. “There is already a decline in demand over the last two weeks as customers are delaying purchases, waiting for festive discounts,” Meena observed. “If sales are pushed too close to Diwali, customers may move to offline stores where delivery is immediate and pricing on appliances can match e-commerce.”
Notably, Dutta pointed out that offline businesses could benefit. “Small offline businesses that don’t have GST numbers and don’t need to compile GST returns may be able to quickly benefit from lower input costs and may be able to become more price competitive,” he said.
Need for Government Clarity
Both Dutta and Rastogi called for immediate guidance.
Dutta warned that reforms must not create “supply unpredictability in this critical season.”
Rastogi pressed for intervention. “There is a strong case for the government to issue clarificatory circulars or transitional relief, particularly given the festive season volumes. Without such guidance, both sellers and platforms face a high risk of disputes, and the compliance ecosystem may be overburdened,” he noted.
Why It Matters
The GST reforms land as festive season spending sets the direction for the retail year. E-commerce platforms draw about a quarter of their annual revenues during this period, and sellers use these weeks to recover margins. Datum Intelligence estimates that online shoppers will spend around Rs. 1,20,000 crore in 2025, up 27% from 2024, with quick commerce taking 12% of that share. At this scale, even small invoicing or compliance errors can lock up billions of rupees in disputed sales.
The reforms already shape consumer behaviour. Shoppers hold back purchases while they wait for clarity on tax rates, and platforms face pressure to adjust quickly. If festive sales move closer to Diwali, buyers may switch to offline stores that match appliance prices and provide immediate delivery.
The rollout will show whether platforms and sellers manage a nationwide tax change in the middle of their busiest season or allow it to disrupt India’s largest online retail channel.
(Published in Medianama)
Devangshu Dutta
June 30, 2025
In every strategy meeting today, one metric is invariably mentioned: Customer Acquisition Cost (CAC). Whether you’re a well-funded corporate retailer, or raising your first angel round, or a well-established digital duopolist brand scaling Series C, CAC is one of the key performance metrics. “Real” spend that is neatly broken down by channel, optimised by funnel tweaks, scrutinised to the last rupee or dollar.
But there’s a metric we almost never hear about that could be costing brands far more in the long run.
Let’s call it Customer Forfeiture Cost (CFC), the residual lifetime value that is lost when a customer walks away from your business not because of price, competition, or even shifting needs, but because of a “burn”: a delivery missed or messed up, a refund that took weeks, an arrogant customer service call, or a product that failed spectacularly against the promise. In other words, when your brand hurts someone enough to make them walk away. Probably for ever.
It’s a paradox: brands are pumping thousands of crores into acquiring users, but they’re bleeding value at the other end. Yet, while CAC is a line item in every financial statement, CFC is invisible in management dashboards. CEOs don’t announce, “We’ve cut our forfeiture cost by 20% this quarter.”
Yet. every CXO knows it exists. The NPS scores, the social media complaints, the “never again” comments in reviews, the sinking feeling when repeat purchase rates fall.
Why CFC Matters More Than Ever
In every business, during the early stages each sale is a victory. Whether it was the retail chains that grew in the 1990s and early-2000s or the digital upstarts that came up through 2010s and 2020s, scale has been the mantra, and investors have poured money into scaling through the growing consumption of India 1 and India 2 customers.
Today customer acquisition isn’t cheap. The same person who clicked impulsively in 2020 now thinks twice before confirming payment. In this landscape, retention isn’t optional, it’s existential.
Every lost customer isn’t just a refund processed, or a cart abandoned. It’s the long tail of future repeat purchases that will never happen, negative word of mouth and brand distrust in the customer’s circle of influence, and increased future CAC due to declining organic reach.
Way back in 1967, management consultant Peter Drucker wrote in his book “The Effective Executive”: “What gets measured, gets managed”.
Today your CAC may be Rs. 500-1,000. If the average customer life time value (LTV) is Rs. 10,000, and a single burn causes churn after just one order worth Rs. 2,000, your CFC is Rs. 8,000, and that doesn’t even include reputational spillover.
Why We Don’t Measure It
Yes, CFC is hard to quantify. It’s not as easily attributable as ad spends. There’s usually no neat model telling you why someone never returned, because tech stacks aren’t typically designed to track emotional exits. And let’s face it, introspection about broken relationships is uncomfortable, even for management teams.
But that doesn’t mean it’s not real. If a customer leaves because your delivery executive messed up, or because your app crashed during checkout twice in a row, that’s on you, not the market. And in a business climate where sustainable growth is the mantra, LTV is king.
Ignoring CFC is like watching your roof leak and blaming the rain.
Toward a New Discipline
Brands and retailers must start measuring CFC, the value lost when customers disengage due to friction, mistrust, or neglect, and then start working on reducing it. This can be done by:
The Competitive Edge We’re Not Using
In a crowded space where everyone’s vying for eyeballs, trust is the true moat. Customers don’t expect perfection – they do expect accountability, authenticity, and recovery when things go wrong.
Brands that understand and act on Customer Forfeiture Costs will quietly start building a powerful edge: deeper brand loyalty, lower CAC over time thanks to referrals and repeats and greater lifetime value per user.
In other words, real, compounding value.
As the Indian brand ecosystem matures, Customer Forfeiture Cost needs to be as visible and valued as CAC. Acquisition is the invitation; experience is the relationship. Relationships, once broken, are expensive to rebuild; if they can be rebuilt at all.
In the end, growth isn’t just about who comes in. It’s about who stays, and why.
(Written by Devangshu Dutta, Founder of Third Eyesight, this was published in Financial Express on 2 July 2025)
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February 23, 2025
Chitra Narayanan, BusinessLine
New Delhi, 23 February 2025
India’s formidable array of craft traditions got full play at the just concluded Bharat Tex 2025, the mega textile trade show in New Delhi that showcased the best of Indian weaves to the world. But if there was one theme that dominated this year’s textile extravaganza, aimed at generating more exports, it was the focus on zero-waste fashions and upcycling. Everywhere the eye could see were standees and gigantic posters pushing the message of conscious consumption and sustainability — be it regenerative cotton, innovative models of textile waste collection, or eco-friendly fibres.
Taking centre stage at one of the halls at Bharat Mandapam, the venue, was a section that showcased age-old traditional arts like rafugari (creative darning or artistic mending), patchwork quilts and toys, and chindi durries (the art of weaving rugs and carpets with waste).
Juxtaposed against these ethnic ways of upcycling waste were the modern works of startups that rose to the textile ministry’s grand innovation challenge to work with discarded materials. From microbial dyes that are non-polluting to flowing fashionable lehengas created out of textile waste, the startups showed that a lot can be done in this area. The ministry had challenges in three more segments — jute, silk and wool.
Some takeaways from a walk-through of the textile trade show:
Closing the loop
The fashion and textile industry generates enormous waste. How to cut down on this was a subject of much deliberation and showcases. There were a lot of good ideas on display, showing that a fair amount of work has been done with fibres (bamboo, banana, flax), as well as creativity and ingenuity in weaves and finished garments.
As Devangshu Dutta, Chief Executive of the consultancy Third Eyesight, points out, due credit must be given for the good work going into generating solutions that will reduce waste, be it textiles that are reprocessed and reused as yarn, or refashioned garments or reloved apparel. But, as he adds, on the other hand we have brands that are constantly looking to grow their business and there is a race to the bottom in terms of price. The relaunch of fast fashion retailer Shein in India is sending conflicting signals. “The basic engine is pumping out more and more products, and that has to be tackled,” he says, pointing to the competing forces at work.
The source of hope, he says, is the fact that the young are a bit more conservative about how they consume and what they consume.
Sandip Ghose, CEO of MP Birla Group, which has one of the oldest jute companies in India, was among the visitors at Bharat Tex. “As an industry insider, what I found good at Bharat Tex was that quite a bit of research seems to be on, both for finished fabric and for weaving. There was a lot of work on making jute look aesthetic. There were some vanity projects like tea leaves packed in jute bags. But the challenge is in two areas — commercialisation, and scaling up of these ideas,” he says.
He rues that the jute sector has not taken advantage of the production-linked incentive scheme at a time when the world is looking for eco-friendly and biodegradable textiles. “A tripartite partnership between the Centre (Niti Aayog and textile ministry), State government, and industry would address the issue of industry’s dependence on subsidies, labour issues and exports,” he says, adding that if India is looking at textiles as a major export area, jute is an option that has been missed.
Spinning into luxury
A clear trend evident from a tour of some of the apparel and home textile pavilions is the move towards premiumisation, similar to what is visible in other sectors, noticeably FMCG.
Talking to the manufacturers, especially those focused on the domestic market, the story one heard was that consumption had slowed in the mass segment, but was reassuringly strong in the premium segment.
Several players were also moving into the luxury and uber luxury segments. Both myTrident and Welspun had striking luxury collections.
Another trend visible in the home textiles section was the use of celebrity designers — myTrident’s eye-catching collection by resort-wear designers Shivan-Narresh; and Welspun’s beautiful sets from Kate Shand and Payal Singhal.
“When the economy suffers, it is the poor and middle class who cut down. There is no pressure to reduce consumption at the upper levels, and companies will try to tap into demand that is recession-proof,” says Dutta, explaining the push towards luxury by textile manufacturers.
New trade routes?
Export houses seemed reasonably happy with the buyer interest. Some mentioned that it was interesting to see buyers from Russia at the fair. However, for those supplying to US entities and Western Europe, the buyer interest from Russia may not translate into deals, given the risk of sanctions they could face.
To sum up, it was a fairly good showcase of India’s textile prowess to the world, but whether it will ring in more export orders is debatable as many of the problems and challenges the sector faces were swept under the carpet.
(Published in BusinessLine)
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July 19, 2023
Faizan Haidar, ET Bureau
19 July 2023
E-commerce companies’ share in warehousing space leasing has fallen to 3% amid declining demand from more than 20% during Covid-19. With the easing of the pandemic, demand faltered for e-commerce companies, even as bricks-and-mortar rivals rented 14% of space during the January-June period as they witnessed a demand resurgence.
In 2020, during the pandemic, e-commerce took more than a fifth of warehouse space while physical retailers had a 9% share, according to data by Savills India.
The overall leasing activity in India continued to grow, with a total space take-up of 22.4 million square feet in the first six months of 2023, up from 20.9 million sq ft a year ago.
“E-commerce companies had over-committed space during Covid, expecting the exponential growth they experienced at that time to continue. There are many facilities where they continue to pay rentals without utilising the full space,” said Gagan Randev, executive director, India Sotheby’s International Realty.
According to Savills data, after increasing demand for warehousing space over the past five years, tier-2 and tier-3 cities saw the share of e-commerce declining to 4% in the January-June period from 34% a year ago.
“In the past three years, year-on-year space absorption from e-commerce has undergone a significant change due to increased investments in their warehousing operations and footprint optimisation through automation, shelving and improved racking systems. These investments have enabled them to increase their existing storage space and enhance overall operational efficiency,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
Experts said the companies are also looking to outsource the space they had taken during the pandemic.
“E-commerce overbuilt the capacity as Covid-led growth was harvested by them. Now that capacity is vacant. That’s why you see a lot of marketplaces trying to externalise their services. That is not coming out of a business model, that is coming out from vacant space,” said Ashvini Jakhar, founder of Prozo, which manages supply chains for companies.
In the first half of 2023, the third-party logistics sector continued to drive warehousing demand, accounting for 44% of the total absorption, up from 37% a year ago, followed by the manufacturing (22%), retail (13%) and fast-moving capital goods and consumer durables sector (6%).
“E-commerce, grew exponentially during Covid when physical retailers were constrained by prevailing conditions and immediately after that when chain stores were still recovering from the pandemic shock,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “However, the retail business in India is predominantly offline; as demand continues to grow overall, it is only natural for physical retailers’ own growth to be driven by the market’s momentum and that would be reflected in warehousing space taken up by them across the country.”
For most retailers, after Covid-19, the warehouse is the epicentre for omnichannel distribution network for offline as well as online clientele.
(Published in Economic Times)
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June 16, 2023
Sharleen D’Souza & Shivani Shinde, Business Standard
June 8, 2023
Why are companies finding it difficult to sustain the supply-chain business?
Experts point out that gross margins in supplying fast-moving consumer goods (FMCGs) are very low.
While it does look attractive because it is the largest part of the consumption market, the last-mile supply chain and retailer are not making money.
“FMCG brands have ensured high margins for their businesses by streamlining and smoothing their supply chains over decades and making them cost-efficient,” said Anshuman Singh, founder and managing director, Stellar Value Chain Solutions.
Singh said in rural markets, the costs of supply chains were proportionately high due to lower volumes.
He added: “The low margins in the last leg of the FMCG rural supply chain make it difficult for new-age rural distribution players to offset the high costs.”
Devangshu Dutta, chief executive officer, Third Eyesight, a consultancy firm, said modern B2B (business-to-business) players had tried to step in to replace the traditional links in supply chains with price incentives and a large selection of products.
“Traditional distributors and wholesalers don’t just add costs but also add value, including aggregating demand for brands, disaggregating supplies for small retailers, providing market intelligence to both ends of the chain, and giving credit to retailers and a sort of financial guarantee for manufacturers,” Dutta said.
He said for their business models to work — online or offline — B2B businesses needed a significant concentration of demand, which had been tough to get in many locations.
On July 6, 2022, the Competition Commission of India (CCI), in the dispute between biscuit manufacturer Parle and B2B player Udaan, upheld the plea of the former, saying it did not violate competition laws. Parle had refused to sell its products directly to Udaan.
Udaan was the first B2B start-up to have a run-in with a well established brand, which was not interested in moving away from the traditional distribution model.
What has that meant for Udaan? It has meant tweaks to its business.
It further diversified its product portfolio so that its access to the market was not impacted.
It forayed into the mobile accessories segment as local brands tapped into its network of over 3 million retailers.
Earlier, this year it expanded its reach in the miller segment, which supplies staples like pulses, grains, wheat, rice, and oil.
Udaan aims to take on board about 100 miller partners per quarter.
It works with over 500 miller partners, supplying over 10,000 SKUs (stock-keeping units) to retailers and kirana owners, according to the company in an interaction with Business Standard.
The other company that recently had to tweak its business or go back to its focus on rural India is Pune-based ElasticRun.
B2B start-up ElasticRun has decided to focus on the core business and wind up its new expansion plans.
Backed by SoftBank and Prosus Venture, ElasticRun, which typically runs distribution for FMCGs in rural areas, decided to expand and also cater to retailers within city limits, i.e. tier 1 and tier 2 markets that had a strong distribution owing to companies having direct distribution in those areas.
“We initiated a pilot for urban markets. But through the year, as the macro changed, we decided not to pursue the urban pilot and focus on our core of rural business … we have to part ways with almost 2 per cent of our employees,” said Sandeep Deshmukh, co-founder and chief executive officer, ElasticRun, in an earlier interaction with Business Standard.
ElasticRun extends the reach of the brands’ direct distribution networks to deep rural markets. It enables access to a set of net new stores and customers, who were not accessible through traditional distribution networks.
The need to spend in order to get market share has caused well-entrenched players like Amazon to pull out of some of its distribution business.
Amazon India has decided to shut down Amazon Distribution, according to sources. This follows its recent decision to close down its food delivery and edtech offers. The moves are part of the annual operating planning review process amid global macroeconomic uncertainties. The e-commerce giant is looking to focus on its core businesses, sources said.
Amazon Distribution operates a platform where sellers sell FMCGs and apparel products from companies and distribute them among kiranas and small neighbourhood stores.
However, this unit operated in only three cities of Karnataka — Bengaluru, Mysuru, and Hubbali.
(Published in Business Standard)
