Online Sellers Allege Predatory Pricing By Flipkart, Amazon

Online Sellers Allege Predatory Pricing By Flipkart, Amazon

A group of online sellers has written to the Competition Commission of India alleging that Flipkart's WS Retail and Amazon's Cloudtail indulge in predatory pricing and discounting when selling their private label products, destroying the business of smaller rivals such as Snapdeal and online sellers. The vendors also complained that WS Retail and Cloudtail sell branded products such as phones, electronics and fastmoving consumer goods at "rock bottom prices".

The retailers of private labels Amazon Basics and Flipkart SmartBuy have been tendered special benefits that haven't been disclosed publicly, the All India Online Vendors' Association, a group of 2,000 sellers on various online platforms, contended in a letter to the CCI. "Flipkart has always conducted its business with transparency, integrity and in full compliance of all applicable laws," a company spokesperson said. "Our private label, SmartBuy, has enjoyed rapid success primarily due to the superior quality of products."

An Amazon India spokesperson said, "We are completely compliant with Indian laws and policies. Prices for products on the Amazon. In marketplace are determined by the sellers. We work hard and continually innovate to offer services such as FBA (Fulfilment by Amazon) and Easy Ship to sellers on our platform, that enables them to significantly lower their cost of selling and reducing defects as they sell to a nationwide customer base. Sellers pass on these savings as lower prices on the platform."

Cloudtail India, one of the largest sellers on Amazon, offers a range of private labels, including Symbol, a menswear brand, and Myx, an ethnic wear label for women. In retailing, private labels typically earn a larger gross margin than products sold by other vendors, even when offered at a discount. The sellers' group alleged that the private label retailers were getting preferential treatment.

"Certain basic products are retailed at lower-than-manufacturing prices in order to kill competition on the marketplace itself," the association said in the letter. "All premium advertisement spots are reserved for above-mentioned companies (WS Retail and Cloudtail)." Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy's personal investment vehicle Catamaran.

WS Retail was set up by Flipkart cofounders Sachin Bansal and Binny Bansal in 2010. The founders sold their stake in WS Retail in September 2012 after facing the heat from regulators on circumventing rules that don't allow foreign-backed ecommerce companies to sell directly to consumers. WS Retail remains the largest seller on the platform and Flipkart is trying to reduce its dependence on the entity.

‘Unnatural internal competition’

An AIOVA spokesperson said that while the promoter of a leading ecommerce company is pleading for a level playing field against foreign competition, there is "unnatural internal competition, which has been made to destroy competition, capture market, earn revenue by dubious means.

Small and medium sellers have previously complained about marketplaces arm-twisting them with policies that favour consumers and larger sellers. They have written to several government bodies seeking intervention and want a regulatory body set up for the sector.

Apart from not being able to sell products directly to customers, marketplaces are not allowed to offer discounts or influence prices. No seller on a platform can account for more than 25% of sales.

While competition in India's ecommerce space is intense, the biggest of such companies are yet to make a profit. Snapdeal's loss for the year widened to Rs 2,960 crore for the year ended March 2016 as sales rose 55% to Rs 1,457 crore, according to filings with the Registrar of Companies. A year earlier, it had posted a Rs 1,319 crore loss on Rs 933 crore of sales. With Flipkart posting a loss of Rs 5,223 crore and Amazon Rs 3,571 crore, the big three of India's online retailing had a combined loss of Rs 11,754 crore in the previous financial year.