Losses not from discounting, but due to investments, Flipkart, Amazon tell DPIIT

KOLKATA | BENGALURU: Flipkart and Amazon have told the government they incur losses in Indian operations due to investments into building the business and technology, and not because they fund predatory pricing as alleged by offline trade lobbies, two senior industry executives said.

India’s two largest ecommerce marketplaces have communicated to Department for Promotion of Industry and Internal Trade (DPIIT) that they are investing big on creating warehouses and logistics network, technology and other such areas, while reiterating they are fully compliant with all laws and FDI norms for online marketplaces, the executives said.

Amazon said it is making a profit at a transaction level in India. In their response to queries from DPIIT, Flipkart and Amazon also denied allegations of dictating pricing and favouring certain sellers. “The marketplaces have said that all sellers have access to a live price dashboard where they can see each other’s price and then independently decide on discount, and they (marketplaces) have no role in either pricing or discounting,” an executive said.

Sellers have access to a nationwide consumer pool through ecommerce and can sell in volume by offering lower prices and yet make profit due to the large scale of operation, Flipkart and Amazon have explained to DPIIT.

“Sellers also source products directly from manufacturers whereby they have a higher margin than a single offline store,” another executive told ET.

DPIIT had sent a set of detailed queries to both the marketplaces last month after allegations by Confederation of All India Traders (CAIT) that they had burnt money in deep discounting during the festive season sales, violating FDI norms, impacting Diwali sales of offline retailers that slipped 40-50%.

The marketplaces said they have responded to all the queries.

In its response, Flipkart said a dominant majority of products sold are online-exclusive which are made available by sellers and brands, and not even available offline, hence the allegation of predatory discount further does not hold ground, executives said.

Amazon and Flipkart also said they are roping in thousands of smaller sellers and offline traders as a priority area, while working with micro, small and medium enterprises.

The two marketplaces have explained their business models and other details to DPIIT through written responses as well as in meetings with officials. Amazon India country head Amit Agarwal had met DPIIT top brass earlier this week.

When contacted, Flipkart said it has responded to DPIIT queries and is compliant with all laws. Flipkart group chief corporate affair officer Rajneesh Kumar said the sellers have a dashboard on which they have full control over their products and have access to offers on the marketplace.

An Amazon India spokesperson said the company continues to engage with the government and has emphasised how it has consistently worked closely with local kirana stores in the last six years.