New Delhi: It may have sent the cash registers ringing, but the bumper ‘Big Billion Day Sale’ online splash by Flipkart has pitched the country’s largest e-tailer head-on against top consumer goods players such as Samsung, Sony and LG, some of whom have suspended fresh sales to the online retailer and are even considering legal action for what they term as “predatory pricing”.
Further, a senior executive said his company, which deals in white goods, may not be able to provide warranty on some of the products that are sold through e-tailing platforms. “These goods are being sold through unauthorized channel partners, which is like buying from the grey market. How can we provide a service cover?”
Irked at the “market-distorting” discounts that the e-retailers offered on Monday, which severely impacted the business of brick-and-mortar retailers, some companies have decided to suspend supplies to Flipkart till the time they get an undertaking that prices will not be slashed to “unrealistic” levels.
“This is a clear case of predatory pricing just to shoot up traffic at their website, and build up valuations unrealistically. This is not acceptable and we will ensure that this does not happen again,” a top functionary at one of the big companies said.
LG, the consumer appliances major, has decided to not deal with the e-retailers at all. “We do not deal with them directly, and they are not our authorized trade partners,” Sanjeev Agarwal, VP (sales) at LG Electronics India, said.
Sony India was also miffed at the huge discounts being offered online when compared to prices at the bricks-and-mortar showrooms, which still account for over 90% of overall sales. “The hygiene has to be maintained in terms of pricing. We will hold discussions with the online retailers to look at the way forward and ensure that the pricing is realistic,” Sunil Nayyar, head of sales at Sony India, said.
A top company decided to pull the plug on Flipkart after what it termed as the “Monday Fiasco”. “They are not playing fair. They are damaging our brand and killing the organized retail, which provides livelihood to lakhs of people,” said a senior official with an electronics major.
Some of the companies are considering legal action. “We will definitely seek legal opinion. They are damaging our brand. We want to know what the modus operandi is and how are they able to sell below the cost price.”
Rachna Nath, who tracks retail and consumer sectors at PwC India, said online retail is here to stay, though its current share is less than 5% of the overall market. “It is still not a threat to traditional retailers. But, it is a shift that is happening. Thus, companies will need to build their strategies while taking this into consideration.”
Companies are under severe pressure from their traditional retail partners, who are up in arms against the online retailers. Heavy discounting by the e-tailers in the middle of the big-volume festive season has impacted their business badly.