Flipkart incentivises sellers to offer discounts

Flipkart incentivises sellers to offer discounts
Photo Credit: Photo Credit: Reuters
16 Jul, 2019

Walmart-backed e-commerce platform Flipkart has introduced a new initiative to incentivise sellers, effectively circumventing the regulatory constraints on predatory pricing.

Sellers offering 5% discount to customers who have opted for the loyalty programme Flipkart Plus will receive up to 50% of discount as reward per unit sold on the net gross merchandise value (GMV) or net unit sales,the e-commerce company said in a letter sent to its seller community that has been reviewed by TechCircle

“The incentive is a way of offering a concession on our fees and commissions for achieving all the parameters of the incentive programme,” the letter said.

This is a voluntary programme, and sellers can opt out at any time. Sellers enrolled in the programme have to maintain order cancellation under 0.5% during the promotional period, the letter said.

“Flipkart has made a systemic way of giving incentives to sellers from its fees. Sellers can voluntarily participate in this process. This system has been there for about two years. Flipkart keeps on refining it. However, the process of selecting sellers who can participate in this is opaque," a Gujarat-based seller told TechCircle.

Flipkart Plus, launched on August 15, 2018, offers faster and free delivery, early access to major sales events and better customer support.

In June, Flipkart reduced seller commission and the shipping fees for products across different slabs of pricing to attract new sellers and encourage smaller players to join the homegrown marketplace.

India’s e-commerce market leaders Flipkart and Amazon were forced to make certain structural changes and launch special programmes to adhere to the new regulatory guidelines and attract more sellers.

In a review of the foreign direct investment (FDI) policy on e-commerce in December 2018, the Department of Industrial Policy and Promotion (DIPP) sought to deter e-commerce companies from providing steep online discounts. The new norms prohibited e-commerce firms from influencing the sale price of goods or services, directly or indirectly, on a marketplace. It also directed them to offer a level playing field to all sellers on the platform. It further ruled that sellers should not be discriminated against for special offers like cash backs or faster delivery services.

E-commerce marketplaces are prohibited from selling products of brands they directly or indirectly own on the platform. The clarification note said: “An entity having equity participation by e-commerce marketplace entity or its group companies, or having control of its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity.”

The Press note 2 of 2018 had enforced some restraints on inventory sourcing from the B2B businesses of e-commerce firms. Any vendor who sources more than 25% of purchases from one marketplace entity or its group companies will be deemed to be controlled by the e-commerce company.