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Amazon, Flipkart ask brands to bear discounts

The e-commerce behemoths are attempting to quell price distortions, to ensure strict compliance with ecommerce rules for foreign marketplace companies.

Jul 10, 2019 by The Passage Team
Amazon, Flipkart ask brands to bear discounts

Amazon and Walmart-owned Flipkart have asked brands to give in writing to sellers the negotiated, predetermined prices (aka market operating prices) of products. The brands have also been asked to certify that any discounts beyond this will be borne by them and that marketplaces and sellers will have nothing to do with it, executives with knowledge of the matter told Economic Times.

The e-commerce behemoths are attempting to quell price distortions, making steep discounts less of a possibility, to ensure strict compliance with ecommerce rules for foreign marketplace companies. The new system has been implemented in consumer electronics and smartphones, which account for 60-65% of total e-commerce sales.

Earlier, sellers would drop prices at will by funding the discount to remain competitive. The new agreement between seller and brand includes a price guarantee clause. Under this, if a product is available on another marketplace at a lower price, the seller can match that and brands will reimburse the difference by issuing a credit note to the seller.

India allows 100% FDI in ecommerce marketplaces but they can only function as platforms that connect buyers and sellers and cannot influence prices. Brick and-mortar retailers have complained that these marketplaces have been indirectly influencing prices by funding deep discounts of products on their platforms.

Amazon and Flipkart officials have informed sellers there will be no preferential treatment and all will be levied uniform seller commission and logistics rates. There were reports earlier that some of the large sellers used to receive preferential rates and would pass the savings on as discounts, the executives told ET.

The executives told ET that Amazon and Flipkart had started to put these changes in place over a month back. Flipkart CEO Kalyan Krishnamurthy said last week that the marketplace is in full compliance with FDI norms and is ready to face any audit. Amazon India has also asserted that the marketplace is fully compliant.

However, discount offers from specific banks, wallets and cards during special sale events will continue and be available across all sellers in the marketplace as per the FDI guidelines.

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