How Ban on Flash Sales by E-tailers Will Provide a Level Playing Field to Small Retailers

As per the new draft regulations, no e-commerce entity shall allow any display or promotion of misleading advertisements, whether in the course of business on its platform or otherwise.
How Ban on Flash Sales by E-tailers Will Provide a Level Playing Field to Small Retailers

The government is planning to revise the e-commerce regulations in the country and bring about stricter norms, wherein the much-talked-about flash sales may be prohibited.

As per the new draft regulations, no e-commerce entity shall allow any display or promotion of misleading advertisements, whether in the course of business on its platform or otherwise.

What Does It Mean For E-commerce Brands?

Further, if the norms come into effect, every e-commerce shall establish an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by such entity from India.

Amazon and Flipkart, among others, will have to appoint a Chief Compliance Officer, a Resident Grievance Officer, and a nodal contact person in India.

The e-mails sent to Amazon, Flipkart, and Grofers did not elicit any response.

However, other e-commerce brands are in the process of evaluating the changes.

Snapdeal spokesperson said, “The proposed amendments shared by the Department of Consumer Affairs cover multiple aspects of e-commerce operations. We are in the process of evaluating these.”

CAIT Welcomes the Proposal

The Confederation of All India Traders (CAIT), which has long demanded stricter e-commerce norms to protect the interest of offline traders, has hailed the draft norms.

CAIT Secretary General Praveen Khandelwal termed the new draft as a "guiding stone to purify e-commerce landscape of the country which has been greatly vitiated by various e-commerce global companies to the extent that not only the domestic trade has been damaged but even the consumers are also feeling the heat of their unethical business practices."

Khandelwal said that the CAIT will study the new draft rules in-depth and will submit its comments.

This policy change is a welcome move and big relief for MBO smartphone retailers who have struggled over the last 3-4 years to match e-commerce players when it comes to deep discounting, flash sales, and exclusive launches. 

“Such policies will provide level playing ground to the offline retail channel to compete with e-retail giants and help bring up the share of offline smartphone retailers back to pre-COVID times of  55-60 percent of the market,” said Kunal Sarkar, Vice President, PredictiVu (a data analytics firm).

“We welcome this decision taken by the Government. This decision will not only benefit small manufacturers and vendors but will also ensure that the consumer receives the best in quality products at a fair price. This will also reduce competitiveness between large-scale businesses and small and medium-sized vendors. The ease of shopping that e-commerce provides to the consumer will now be paired with equitable and just treatment to the sellers, thus creating a desirable market space," added Mandeep Arora, Co-founder, UBON (a retail brand).

“We support and appreciate this move by the Government as it will help local traders positively and in turn will lead to a boost in the economy. This step would ensure that the domestic manufacturers and suppliers get fair and equal treatment. The ban on flash sales would result in capping and uniformity in the pricing of products on e-commerce sites. Thus, resulting in uniformity in price across platforms for the consumers,” Lalit Arora, Co-founder, and CEO, VingaJoy (a retail brand) said.

Will it Provide a Fair and Level Playing Field

Flash sales are not only restricted to e-commerce sites but are common to brick-and-mortar retailers as well. Oftentimes big-box retailers or brands with retail outlets run such sales to sell out obsolete inventory or slow-moving inventory. 

“E-commerce sites also practice similar flash sales to enable vendors to liquidate their inventories on big sale days. Though the proposed changes say that conventional flash sales by 3rd party sellers are not being targeted, there is a lot of grey area because of the intricate operating structures created by big e-commerce players which enable them to circumvent restrictions on inventory control by them. Even if the proposed changes come into effect, unless there is clarification on this grey area, the intended fair and level playing field will remain elusive,” stated Akshay Hegde, Co-founder, Managing Director, ShakeDeal.

Issues Pertaining to E-commerce Draft 

Flash sales by e-commerce platforms can be viewed as 2 distinct models. 

-    First is where the e-commerce platforms run a big annual sale which typically lasts for a period of a few days 
-    Second where the platforms continue to run on no occasion lightning deals from time to time. 

In the first approach, the platforms follow a well-bucketed approach where they offer low prices on certain items and bucket them with other moderately priced items. This way a consumer who is coming to buy on the platform feels that he has gotten a great deal and also the platform doesn’t lose any money on the aggregated level. Also, since these are time-bound festive deals, consumers, retailers, and other stakeholders are well aware that the offered pricing is for a very limited period and may not be offered again. 

On the other hand in the second approach of no occasion lightning deals, it is often seen that sellers who want to liquidate their excess or aging inventories use the platform to liquidate at very low and at times unrealistic prices. This typically spoils the market sentiment as consumers often continue to wait for these unrealistic discounts for buying decisions hoping for such deals to come and also expect Offline retailers to match those prices. 

“I strongly believe that there should be the implementation of scientifically calculated boundary conditions to implement Minimum operating prices across categories for sellers trying to sell products across both online and offline channels. This way the pricing factors will be equally favorable to online and offline players,” Vijeta Soni, Co-Founder & CEO, Sciative (A Pricing Intelligence company) said.

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