Online vs physical: feud intensifies as vendors see red over steep discounts

Allege expenses on delivery and return eating into margins.

Published: September 11, 2014 5:01 am
Online marketplaces, like Flipkart and Snapdeal, have been accused of undercutting physical stores. (Flipkart.com) Online marketplaces, like Flipkart and Snapdeal, have been accused of undercutting physical stores. (Flipkart.com)

The stalemate between brick-and-mortar retailers and e-commerce companies over issues like pricing and preferential treatment to particular vendors seems to be escalating. The latest body to have raised concerns over alleged unfair practices by e-tailers is Online Vendor Association of India (OVAOI), an association for parity among online and offline players.

The association has raised concerns over e-tailers undercutting them for products listed on their platform, which has impacted vendors who operate on thin margins. “With hardly any regulation from the government on e-retailers and almost 20-30 vendors selling the same type of products to online sellers with a huge price disparity, things are really becoming tough for vendors working already on thin margins. We have to go by the diktat of online sales portals with hardly any say,” said Rahul Suri, convenor of OVAOI.

Vendors associated with OVAOI also alleged that expenses related to delivery and returns of products are borne by vendors, which are eating into their margins. Besides, the logistics services offered by the e-tailers leave a lot to be desired. “E-commerce companies are just enjoying VC and FDI funds, as well as bleeding the vendors. The courier/shipping agent sent by the e-tailer does not come on fixed time to pick up the product, creating chaos for the vendor,”said Shishir Sharma, a vendor.

E-tailers undercutting prices, thus impacting the business of brick-and-mortar retailers and vendors, have emerged as a contentious issue of late. Online marketplaces, like Flipkart and Snapdeal, have been accused of undercutting physical stores. Even electronics manufacturers like Asus and Lenovo have warned buyers against purchasing from Flipkart, Snapdeal and Amazon, saying they were not authorised re-sellers of their products.

Brick-and-mortar retailers had earlier launched an online forum called “We will Act,” condemning the modus operandi of e-tailers. The forum, through its eponymous website, has appealed to the Centre to act against “unethical online retailers”, alleging that “these unethical online retailers have been selling in losses and routing money illegally to kill the market.”

At least 12 e-tailers are being investigated by the Enforcement Directorate for allegedly circumventing FDI rules, which bar any e-tailer with FDI from holding inventory. The ED has already found evidence against Flipkart for violating FDI norms to the tune of Rs 1,400 crore. However, the hue and cry raised by offline retailers or the ED hardly seems to have impacted the e-tailers, with the domestic e-commerce market poised to grow five-fold from the present $3.1 billion by 2020.

fe Bureau | The Financial Express

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