For major e-commerce players, discounts still the way forward

Some believe discounting is a flawed business model and would not help these companies and their balance sheets

It is still discounts that e-commerce players have to rely on to bring in customers, though they might claim otherwise.

In the last few months, e-commerce players across the board facing heat from investors, have come out and said that they have an eye on profitability and have gone down on discounts. However e-commerce marketplaces, cab aggregators, mobile wallets, e-grocers, restaurant search and delivery portals, travel websites are all on a daily basis sending out mails, SMS messages, notifications on apps on various discounts offered.

While online marketplace giant Flipkart is having various vertical sales from time to time, Amazon, Snapdeal, Paytm are all offering discounts on various items ranging from 10 per cent to as much as 75 per cent.

 

Online restaurant search and discovery portal Zomato is offering end of the month 15 per cent discount on next seven orders. Travel website goibibo.com is offering flat discounts ranging from Rs 600 to Rs 2,500 for buying flight tickets and up to 60 per cent off on hotel bookings. For one of the offerings, cab aggregators Uber and Ola charge just Rs 6 per kilometer. Fashion vertical giant Myntra has launched an end of season sale in July offering 50 per cent to 80 per cent discounts.

Experts believe that the customer acquisition strategy has not changed much for most of the players. "Even today customer acquisition is based upon initial discounting. Unless they change their strategy, discounting would remain the main route to bring in customers. But this is not a long term strategy and they need to come out with better solutions than discounting," said Amarjeet Singh, Partner - Tax, KPMG in India.

E-commerce players across the board claim to now concentrate of providing better customer experience as a way of ensuring repeat customers. Most are now relying on tools such as precision analytics to deliver goods bought at precise time bands, study the buying pattern of their customers and make the usage of online marketplaces a habit. But industry insiders believe that nothing works better than offering discounts from time to time. Discounts which they claim are being offered by their sellers who want to push their online sales.

"Discounting is still the main way to bring in customers. We are working on a lot of other methods for client acquisition and retention but till the time we have proven methods, discounting would continue. But we are not giving any discounts, it is the sellers who give it," said a senior executive of an online marketplace.

Others also believe discounting is a flawed business model and would not help these companies and their balance sheets are bearing the brunt year after year. "In a competitive e-commerce sector all they have is discounting that is able to get them customers. Once that stops, their sales would drastically go down. Most of their so called metrics such as client retention have been picked up and modified from traditional retail, so there is nothing new or different they are doing," said Praveen Khandelwal secretary general, Confederation of All India Traders (CAIT).

Sometime back, CAIT had filed a complaint with Department of Industrial Policy & Promotion (DIPP) alleging violation of foreign direct investment (FDI) norms for e-commerce by online retail major Flipkart. The complaint was in reference to an advertisement in newspapers announcing the sale of an item together with its discounted price to be available on the e-commerce platform of Flipkart, which is said to be a marketplace. According to CAIT that advertisement violates conditions of the guidelines for FDI in e-commerce.