Flipkart and Amazon communicated to DPIIT that they are majorly investing in building warehouses and logistics network, technology and other such areas.

Flipkart and Amazon tell govt they incur losses due to investments and not discounting
Atom E-commerce Friday, November 08, 2019 - 15:40

Reiterating their stand that they are in compliance with all FDI norms, e-commerce players Amazon and Flipkart have sent detailed responses to the government’s Department for Promotion of Industry and Internal Trade (DPIIT), reports Economic Times. The responses have been sent since the DPIIT had sent them questionnaires to explain how they operated their businesses in light of the complaints by the offline retailers that they were engaged in deep discounting.

On the deep discounting issue, the e-commerce companies have explained that sellers on their platforms are able to procure in bulk directly from the manufacturers and offer higher discounts. This facility may not be available to small retailers. The sheer volumes being bought and sold on the platforms encourage the manufacturers also to offer these discounts. More importantly, there are several products, particularly in the mobile phones category, which are online exclusive. Here again, the offline retailers can have very little to complain about since those products are not even made available to them and the question of price differential does not arise.

On the charge that these companies are absorbing the losses due to the deep discounting practices on their books, the explanation given is that the losses incurred by them are due to the investments into building the business and technology in the Indian operations, and not because they fund predatory pricing. Amazon has even stated that it is making a small profit at the transaction level.

The companies have explained that â€śall sellers have access to a live price dashboard where they can see each other’s price and then independently decide on discount, and they have no role in either pricing or discounting”.

Both companies claim they have answered all the queries raised by DPIIT.

Amazon and Flipkart seem to have pre-empted the suggestion given by the Commerce Minister on co-opting the local retailers in their business. They claim they have thousands of smaller sellers selling on their platforms and the offline traders are accommodated in a priority area. They are working with micro, small and medium enterprises too they have assured.

The companies have had personal interactions also at the Ministry level in order to explain their position.

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