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Flipkart, Amazon, Snapdeal restart sales events after three months

Flipkart and its unit Myntra, Amazon India, Snapdeal and others are all offering discounts of 20-90% on clothing, shoes and other fashion products in the ongoing end-of-season sale. Photo: Hemant Mishra/MintPremium
Flipkart and its unit Myntra, Amazon India, Snapdeal and others are all offering discounts of 20-90% on clothing, shoes and other fashion products in the ongoing end-of-season sale. Photo: Hemant Mishra/Mint

Flipkart, Amazon and Snapdeal had temporarily suspended sales events in April to comply with new regulations that ban online marketplaces from influencing product prices

Bengaluru: Despite the government banning online marketplaces that receive foreign direct investment (FDI) from influencing product prices in March, e-commerce firms have restarted sale events over the past week.

Flipkart and its subsidiary Myntra, Amazon India, Snapdeal and others are all offering discounts ranging from 20% to 90% on clothing, shoes and other fashion products in the ongoing end-of-season sales.

Another marketplace, Paytm, will soon have its own sale event, according to its website.

Flipkart, Myntra with its “End Of Reason Sale", and Amazon promoted their sales extensively, with front-age ads in national newspapers.

Mint had reported on 28 April that Flipkart, Amazon India and Snapdeal had temporarily suspended sale events so as to comply with the new e-commerce regulations.

While the three companies continued to fund part of the discounts purportedly given by third-party sellers on their sites, they had cancelled planned sale events and accompanying advertisements to avoid potential punishment from regulators and the ire of offline retailers so soon after the FDI rules were announced, Mint reported then.

In late March, the government allowed 100% FDI in online retail of goods and services under the so-called marketplace model, seeking to legitimize the existing businesses of e-commerce firms operating in India.

However, the government added two riders that have far-reaching consequences for e-commerce firms. One, marketplaces cannot influence pricing of products and services on their platforms, directly or indirectly. Two, one seller cannot contribute more than 25% of the sales of any marketplace.

These riders will force online retailers to find new ways of giving discounts, and also to restructure their businesses.

While Flipkart had held one smartphone sale since the new regulations were announced, Amazon India and Snapdeal avoided sales.

Snapdeal has in any case been cutting spending on discounts, advertising and other areas to conserve cash as it is struggling to raise funds.

Also Read: Where will Amazon spend its $3 billion?

In the ongoing fashion sales, the discounts are split between brands, third-party sellers and online marketplaces, people familiar with the matter said.

This is not unusual as fashion brands typically offload unsold merchandise from the first half of the year in the July sale.

It will be interesting to see how offline retailers, who lobbied hard to persuade the government to ban online marketplaces from offering discounts, react to the first big sale events by e-commerce firms after the new FDI rules were announced.

Before the new regulations were announced, the All India Footwear Manufacturers and Retailers Association (AIDMRA) had filed a case in the Delhi high court alleging that online retailers were violating FDI rules by selling directly to consumers. Despite the new rules, AIDMRA is expected to continue fighting the case.

Regardless, the end of season fashion sale is a welcome break for e-commerce firms, which have reported weak sales numbers so far this year because of a combination of lower discounts, pullback in advertising spending and the FDI rules.

Also Read: E-commerce firms put sales on hold

For the first time in years, online retail sales in April were at a lower level than December of the preceding year, Mint reported 3 June. Gross e-commerce sales including discounts were an annualized $15 billion in December, according to research and consultancy firm RedSeer Consulting.

E-commerce firms are hoping for a sharp improvement in the second half of the year. Some have already reported a surge in demand during the fashion sale.

Online fashion retailer Myntra said it saw an increase of 23 times its daily sales during its two-day “End Of Reason Sale" over the weekend. It recorded more than 37 million visits over the two days and 30% of users were first-time buyers on the platform.

“The End of Reason Sale has truly turned out to be the biggest fashion shopping event in the country," Myntra chief executive Ananth Narayanan said. “Over 3 million products were ordered during the two days. We also saw an unprecedented 1 million app installations and over 37 million visits to our platform. The Myntra app during these two days was the No.1 app on iOS and (among the) top 5 apps on Android."

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