Top ecommerce companies, which have over the past couple of years lured millions of Indian consumers to shop online by offering deep discounts, have collectively reached an understanding to cut the high discounts through coupons to contain losses.
Flipkart, Myntra, Jabong, Snapdeal and Amazon, among others, have unofficially decided to bring down coupon discounting to the global levels of 20% by the end of this calendar year, a couple of industry insiders told ET.
"Many of us have met and discussed on it a while back, particularly about coupons," said a top executive of one of the biggest ecommerce companies. "We took certain step and that's what you see now." Over the past six months or so, ecommerce companies have brought down the range of discounting through coupons on various products from as high as 40% to about 30% currently. Now they plan to bring it further down to global average of 20% in the coming months. "There was a time when we were creating market using it (coupon discounting) as an incentive to make people come on board. Now we do think it is time to bring it to normal level," the executive said.
Co-founder of a large online retailer said it is about time the ecommerce companies clamp down on discounts that is hurting businesses.
"It should happen as the kind of discounts is not sustainable. But unless there are difficult questions from investors, how can there be a correction?" the person said on condition of anonymity. Ecommerce players, including Flipkart, Myntra, Jabong and Amazon, did not respond to emails seeking comments on the matter as of press time on Tuesday.
A Snapdeal spokesperson said, "Since Snapdeal is an online marketplace that connects buyers and sellers across the country, the pricing decision solely lies with the seller listing the product." The spokesperson did not respond to specific questions.
Consumers and coupon companies confirm that the amount of coupon discounting has come down since Diwali, when ecommerce players took discounting in India to new highs, creating an unprecedented online shopping frenzy in the country. "Coupons discounting have for sure reduced," said Aman Jain, co-founder of coupon site GoPaisa.com. "Some four months ago, typical coupons were 35-40% discounts. Now, coupons are no more than 25-30% discounts and the frequency at which they were doling out new coupons has reduced quite a lot lately."
He attributed the cuts in discounting to online companies' quest to turn profitable.
A recent report by PricewaterhouseCoopers said online retailers in India have incurred losses of about Rs 1,000 crore over the years due to heavy discounting.
Govind Shrikhande, managing director at leading department store chain Shoppers Stop, had told ET last month that ecommerce companies shelled out about $600 million, or about Rs 3,720 crore, in discounting products to woo consumers during the crucial shopping quarter of October to December last year.
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