Companies are daggers drawn against e-tailers

Faced by the onslaught of heavy discounting by online retailers, several companies are taking steps to prevent them from cannibalising their brick-and-mortar sales.

Nikon, which sells a range of cameras, recently issued an advisory on its website against buying the company’s products from two leading e-commerce firms — Flipkart and Snapdeal.

Similarly, Canon has taken note of competition from online players and come out with guidelines on selling its products online.

Electronics and lifestyle brands which have been witnessing sluggish sales due to macro-economic conditions are also suffering due to the huge discounts offered by e-commerce players.

Alok Bhardwaj, Executive Vice-president, Canon India, said that only those authorised by Canon can sell their products. In other cases, the company does not take responsibility for damage. Several other players also said that they have a policy to prevent price under-cutting by e-commerce players. In many cases companies are also refusing to offer warranty on products bought online if they are not authorised.

Industry sources pointed out that Nikon India in a letter to its distributors seen by Business Line strictly warned them from selling their products to online players and failure to comply with this clause would result in the distributor being debarred for three months.

Nikon and its media agency did not respond to Business Line till the time of going to press. Snapdeal also did not respond to a query.

Siddharth Bindra, MD, Biba Apparel, which also sells apparel online, said out that the company has drawn extensive agreement with e-commerce players to ensure that the products are not sold discounted. “We have an agreement in place which prevents brands from selling the products cheaper than we sell at our stores.”

Adidas also has policy where e-tailers can sell only last season’s products on discount while the rest on marked up prices.

Many e-commerce players are also getting into the volume game, industry players said. Backed by funding from venture capitalist and private equity players, they are trying to establish customer traffic.

Abhishek Ranganathan, Vice-president, Phillip Capital, a brokerage firm, notes that discounting is used to acquire market share. In categories such as electronics, apparel, shoes and books, the discounts may be in the range of 15-20 per cent. Price is a key driver online as it makes up for the touch-and-feel experience, he said. Ranganathan, however, adds that monitoring offline sales would be difficult if it works on a market-place model.

E-commerce firms largely work on warehousing model and the sourcing model. In case of the former, the e-commerce company buys goods and keeps an inventory, thus giving it a better chance to deliver goods faster, as soon as an order is placed. In case of the latter, the goods are not bought or stored. They are sourced from a vendor who supplies it in accordance to the order placed.

According to a Technopak report, brick-and-mortar’s limited penetration is proving to be a sweet spot for online retailers and nearly half of the sales of existing e-tailers come from towns and cities beyond the eight metros.

Technopak estimates that online retail in India will grow from the current $0.6 billion to $76 billion by 2021.

bindu.menon@thehindu.co.in

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