Top trader-retailer body moves govt against Amazon, Flipkart festive sales

E-commerce platforms have added about 650,000 new vendors, mostly from tier-2 and 3 cities
The Federation of All India Vyapar Mandal (FAIVM), the apex body of traders and retailers representing 40 million merchants, has requested Union Finance Minister Nirmala Sitharaman and Union Industry and Commerce Minister Piyush Goyal to initiate enquiries on some suspected aspects of festive mega sales announced by e-commerce firms Amazon and Flipkart.

In a letter jointly sent to the Sitharaman and Goyal, which has also been addressed to Prime Minister Narendra Modi, FAIVM alleged that hefty discount amounting to predatory pricing; cashback by credit and debit card banks, and high rate of interest on EMI (equated monthly installment) offered to buyers are issues that need to be scrutinised. 

FAIVM said it is concerned whether GST (goods and services tax) being collected by vendors is being properly deposited with Government as per norms, as about 650,000 new vendors have been added by e-commerce portals. It said most sales are happening in tier-3 and rural areas where awareness on GST is not adequate.

“The share of e-commerce is likely to double this festive season from 5 per cent to 10 per cent,” said V K Bansal, National General Secretary, FAIVM. 

He said reports indicate that the gross merchandise value (GMV) by e-commerce this festive season is expected to be $7 billion (about Rs 50,000 crore). This is about 84 per cent over last year's festive sale. Bansal cited reports about 50 million new shoppers expected to add in e-shoppers list, of which about half will join from tier-3 cities rural areas. On the other hand, he said e-commerce platforms have added about 650,000 new vendors, mostly from tier-2 and 3 cities.

Jayendra Tanna, National President, FAIVM said he is sceptical about the deposit of GST into Government coffers, which is collected by the new 650,000 vendors. Since most sales are happening in tier-2 and 3 cities and villages and that too cash-on-delivery (COD), he said there is not much awareness on GST systems. Hence, he said the government needs to check whether after collecting GST, vendors are properly paying the same to the Government.

C H Krishna, President of Federation of All India Distributors Association (FAIDA) said that to check the predatory pricing system by e-commerce companies, the Ministry of Commerce brought a press note No 2 on 26 December 2018. However, he claimed that present hefty discounts being offered seems a violation of para 5.2.15.2.4 (ix) of such press note.

Another senior functionary of FAIVM, Sushil Poddar, who is also President of Confederation of West Bengal Traders Association, felt that there was some “wrongdoing’ related to the credit and debit cards, where banks are offering cashback to buyers up to 10 per cent. Poddar said he is  “surprised” that on one hand banks charge heavily for their services from business customers and on the other hand they are offering cashback up to 10 per cent (with certain cap) on transactions done on e-commerce platforms. He said that debit and credit cards are for facilitating an e-transaction and they charge certain services charges from vendors. He said it is beyond understanding what banks are going to gain by offering cashback. He said this entire issue of cashback on credit and debit cards need to be examined.

Another issue raised by FAIVM is that buyers who purchase on EMI are being charged interest ranging from 20 per cent to 36 per cent by NBFC (non-banking financial companies). Besides that, they are also charging some one-time processing fee. FAIVM said there is a need for the intervention of RBI on such an exorbitant rate of interest.

FAIVM mentioned in its letter that during lockdown, neighbourhood shops served the entire nation by supplying all essentials. However, after Unlock shoppers have moved to e-commerce platforms. “Our retailers in the physical marketplace are entirely deprived of the benefits of festive season sales as e-commerce marketplaces have captured shoppers by offering many lucrative deals which any neighbourhood shop cannot afford,” alleged FAIVM.

E-commerce giants Amazon and Flipkart are witnessing record sales for their biggest festive sale events. The Covid-19 pandemic has accelerated the shift to e-commerce, as an increasing number of consumers are shopping online with greater frequency.

Amazon has witnessed the biggest ever opening for sellers and brand partners during its flagship festive sale Great Indian Festival (GIF), which started last week. More shoppers and sellers participated in the opening 48 hours of the month-long GIF than any opening two days before. It got orders from close to 98.4 per cent of India's pin codes.

Amazon’s rival Walmart-owned Flipkart is also hosting its flagship sale event of the year, 'The Big Billion Days' (BBD), a six-day event which also commenced last week. Over 300,000 sellers out of which about 60 per cent belong to tier-2 and beyond cities enabled shopping to customers in the first three days of BBD. The Walmart-owned firm said the seller base reach has expanded by 20 per cent this year totalling up to 3000 pin codes.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel