Cashback isn't about pricing, say online units

Online marketplace companies have argued that the concept of cashback is not related to influencing price. And, that these are given to incentivise payment via mobile wallets or credit/debit cards.

Executives in these companies were responding to a seller organisation — All India Online Vendors Association (AIOVA) — seeking government intervention to stop the cashback phenomenon in e-commerce.   

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According to e-commerce companies, cashbacks happen mostly in tandem with mobile wallets to drive transactions.

WHAT THEY SAID

• Online marketplace companies say cashbacks are given to incentivise payment via mobile wallets or credit/debit cards
   
• These companies were responding to the All India Online Vendors Association which is seeking government intervention to stop the cashback phenomenon in e-commerce
   
• It had used a Twitter handle on Thursday to send a message to DIPP to clarify if the practice of giving cashback by Paytm above the seller-funded discount was within the purview of the latest guidelines on FDI in the segment
   
• DIPP replied, “Giving a discount or not is a prerogative of the seller owning inventory. FDI permitted in marketplace, not in inventory based model”

AIOVA claims to have 1,100 sellers and merchants which supply to e-commerce portals. It used a Twitter handle on Thursday to send a message to the department of industrial policy and promotion (DIPP), to clarify if the practice of giving cashback by Paytm above the seller-funded discount was within the purview of the latest guidelines on foreign direct investment (FDI) in the segment.

DIPP promptly replied, through a tweet, that the choice was with the seller. “Giving a discount or not is a prerogative of the seller owning inventory. FDI permitted in marketplace, not in inventory based model,” it said.  

Paytm is not the only one to have taken the cashback route. Flipkart, Shopclues and Snapdeal have also had cashbacks on their portals from time to time. Travel company MakeMyTrip and ticket booking site BookMyShow also offer cashbacks. “We did run a cashback scheme along with Mobikwik. It was more to drive payments via that particular wallet,” said a source at Shopclues.

Banks have also run cashback schemes with e-commerce companies, to promote their cards.

“It is not only marketplace where we give cashbacks. We also give cashbacks in the utility bills segment. It is not a way to influence prices but to increase usage of the wallet,” said a senior Paytm executive. “Hence, it should not be confused with a platform that aids discounting or is a seller of products.”

However, AIOVA contended the move benefited only a few sellers. “When I sell at Paytm, I am not given any such benefits. They are just giving out these benefits to a few chosen sellers,” said its spokesperson, who did not want to be named.