Retail in Asia

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Discount or die: The fate of Indian e-commerce players

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Over the last decade or so, sales, coupons, and cash-backs have played a crucial role in attracting online shoppers. According to a 2015 report by Goldman Sachs, 30% of an Indian e-commerce company’s expenses are towards discounts.

Besides daily deals, leading Indian online retailers have been hosting annual mega sale events such as Flipkart’s Big Billion Day (BBD), Amazon’s Great India Sale, and Google’s Online Shopping Festival, where discounts often ran as high as 80%. During BBD in 2014, Flipkart sold products worth $100 million (over Rs600 crore) within 10 hours.

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E-commerce websites will have to be cheaper than offline stores always, particularly for large items,” said Harish HV, partner at consulting firm Grant Thornton India. Customers may pay more online for small, everyday items, but most don’t mind taking out time to visit stores and compare prices when it comes to big-ticket purchases, Harish said.

Since the beginning of this year, the global investor sentiment towards Indian e-commerce has turned lukewarm. India’s largest online retailer, Flipkart, has been devalued by several investors since January.

In this environment, there is pressure on online retailers to reduce costs and improve margins. This, in turn, has led to a significant drop in discount sales.

During October-December, retailers in India usually register about 40% of their annual sales of clothes, electronics, automobiles, and household items. For e-commerce players, it is going to be a tough trade-off: discounts or profits.

(Source: Quartz)