Home >> Business

100% FDI in e-commerce marketplaces: Huge online discounts may end soon

The government's new e-commerce policy that has eased the restrictions for 100% foreign direct investment (FDI) in B2C online marketplace, confines e-commerce companies from directly or indirectly manipulating the sale price of goods on online marketplaces.

This could mean, no more massive discounts on smartphones or televisions and equality between the prices of your neighborhood retailer offers and online stores.

E-commerce companies here have been making use of attractive discounts to trap consumers to shop online. In the process, in addition to burning hundreds of millions of dollars of investor money and registering huge losses, they have given offline retailers a tough time.

For instance, till last year, Alibaba-supported e-commerce company Paytm was spending $15 million a month to offer discounts and develop their operations. Praveen Khandelwal, secretary general for Confederation of All India Traders (CAIT) said, "They have been using interest-free investor money for predatory pricing. How can we compete against them by borrowing money from banks at more than 12% interest?"

Online marketplaces such as Flipkart created ruckus in the domestic retail industry last year with its 'Big Billion Days' that saw the company retailing around a million products in 10 hours and making around Rs 651 crore in just 19 hours.

Despite new regulations, experts said e-tailers will find a solution to these restrictions. Amarjeet Singh, partner-tax, KPMG India said, "There can be a lot of ways in which you can reward the customer apart from offering direct discounts. For instance, you can offer schemes and cashbacks."