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<ul><li>The <keyword id="36208" type="General" weightage="20" keywordseo="festive-season" source="Orion">festive season</keyword> has always been important to brands, especially to e-commerce players who line up big bumper discounts, look for more retail brands to partner and ramp up their product offerings.</li><li>This festive season, e-commerce platforms are focusing on bringing more personalisation and curation to customers shopping online through greater tech and marketing integration.</li><li>More and more e-commerce platforms are also exploring social commerce, turning their apps into super apps by bringing content, products and trends under one roof for consumers to watch and shop at once.</li><li>With increasing internet penetration, e-commerce players are expecting new growth from Tier II, III and beyond this festive, which will cumulatively contribute to $150 billion of e-commerce as per RedSeer Consulting’s report.</li><li>We speak to India’s leading e-commerce players to find out more about their festive plans and revival expectations.</li></ul>The year 2020 accelerated e-commerce industry, perhaps by a decade, revolutionising the way brands operate, run, and grow their businesses, as well as how consumers choose to shop and pay. In the initial months of the lockdown, businesses witnessed a clear shift in consumer behaviour. Historically offline shoppers also came online due to convenience and safety. Consumers are still hesitant to return to in-store shopping completely and audiences from Tier II and Tier III are also preferring to shop online. The pandemic has evidently caused an inflection point for e-commerce in the country. With the second-largest internet user base, India has emerged as one of the most prominent markets globally. Around 480 million people in India have access to the internet out of which 90 million are online shoppers, according to estimates from management consultancy RedSeer. Shoppers from India’s small towns and cities will cumulatively contribute to $150 billion of e-commerce GMV in the coming decade, until 2030, revealed RedSeer. <div type="image" title="redseer - ecomm report" msid="85901903" hostid="261"></div> After spending a glum year and a half, consumers are excited to celebrate the festive season with upcoming shopping sales for Diwali, Dussehra and Christmas. IPL and ICC T-20 World Cup will further improve consumer sentiment this year. According to a survey conducted by The Trade Desk and YouGov, 82% of consumers shopped online at least once a month in the past six months, and nearly one in four made online purchases several times a week or more often. Titled ‘<a href="https://pages.thetradedesk.com/rs/527-INM-364/images/TheFestiveSeasonPulse2021.pdf">The Festive Season Pulse 2021</a>,’ it further said that 91% of Indian consumers are planning a purchase during the upcoming festive season and six in 10 are interested in learning about new brands during festive season sales. To leverage this uptick in consumer sentiment, the e-commerce category is all set to begin its festive marketing blitz and is preparing to line up big discounts for the season in a few weeks. For this 30-day period leading up to the festive season, leading fashion e-commerce platform <keyword id="319719" type="General" weightage="20" keywordseo="myntra" source="Orion">Myntra</keyword> has planned ‘Big Fashion Festival,’ which will be followed up with Myntra Diwali Sale, with a focus on ethnic wear. It will also be focusing on emerging categories like Beauty and Personal care, kidswear and categories such as innerwear and essentials which have experienced tailwinds post-Covid. Myntra’s Chief Business Officer, Ayyappan Rajagopal said, “We are expecting this festive season to be bigger than last year with more customers using online channels to make their purchases. Demand usually peaks in the 30 days leading to Diwali and we expect this year to be no different. In fact, the demand in the 2 months leading to the festive season is expected to be far more than last time (because people have learnt with time to adapt to a pandemic world). We expect high demand from across geographies and markets - metros, Tier 1, Tier 2, T3 cities and beyond. To cater to that, we have built the right ethnic wear, beauty, and home selection, and have partnered with brands on best deals. Hence, to leverage this demand and provide best value to our customers, we are organizing Big Fashion Festival and Myntra Diwali Sale to make this season a resounding success.” Right on the heels of the festive season, Myntra ramped up its marketing game by onboarding Hrithik Roshan, Vijay Deverakonda and Dulquer Salmaan as its newest brand ambassadors, alongside the existing celebrity ambassadors Kiara Advani, and Samantha Akkineni. Now, it is hoping to double its customer base and cater to Gen-Z shoppers with its high-decibel marketing. “With the optimism coming from recovery from Covid and revival in shopping sentiments along with the habitualisation of digital foray across all customer segments, we see a lot of new customers shopping during this festive season. We have also seen trends in Metro/T1 markets where Myntra has been traditionally strong, pointing towards such a revival. With a positive overall sentiment, we will be looking at doubling our customer base during this period. There will also be an added focus towards expanding our footprint in southern markets, deeper penetration into Tier 2 / 3 towns and exploring customer addition through emerging categories like Kids wear, Inner wear, fashion accessories, Beauty and persona care, etc. The greatest focus will be on Gen-Z cohort of shoppers,” shared Rajagopal. E-commerce platforms are also focusing on bringing more personalisation and curation to customers shopping online through greater tech and marketing integration. More and more e-retailers are exploring social commerce, turning their apps into super apps by bringing content, products and trends under one roof for consumers to watch and shop at once. D2C fashion platform Bewakoof.com that recently raised Rs 60 crore in an investment round led by InvestCorp, IvyCap and Spring Marketing Capital, is expecting to Rs 120 crore in brand sales this quarter. It recently rolled out celebrity-led digital campaigns with Rajkummar Rao, Sanya Malhotra and Farhan Akhtar. It plans to further build its market presence by signing more A-list celebrities to its roster and launch a 360-degree campaign by October. On the technology side, the company intends to launch a gamification-led loyalty program as it upgrades its Bewakoof Tribe with new and exclusive launches for the club members. Sharing the platform’s festive plans further, Prabhkiran Singh, Founder CEO, Bewakoof.com said, “Post pandemic, we saw a strong recovery and growth in certain categories like casual wear and leisurewear because of customers staying at home and with the pandemic slowing down, we expect a strong recovery in categories like ethnic wear, bags, accessories, etc in the festive season ahead. We’re also looking to capitalise on winter wear more this year than usual with winter around the corner and have put in investments accordingly. We expect our brand sales to be Rs 120 crore for the festive quarter.” For Bewakoof, the northern and western markets see the highest demand, followed by West Bengal and Assam because of Durga Puja. Currently, over 6 million customers visit Bewakoof.com every month. Singh told us that the festive season serves as a crucial window in the year for new customer acquisition and bringing back customers that haven’t shopped again for a while. The platform is also planning on increasing its marketing spends this festive. “For this year, 15% of our total marketing budget will be spent for the upcoming festive season.” We’re in the process of rebranding Bewakoof in the next 1-2 months and we’ll have a new look, logo, tagline along with a new set of celebrities that will endorse Bewakoof so we’re excited to roll this out and create buzz around it along with backing it up with top-funnel marketing investments. We plan to go heavy on top-funnel marketing investments starting October,” said Singh. E-retail platform OLX has upped its UI to woo its customers, digitising the entire process of online retailing, including verification of all its premium items. OLX Autos launched a verified inventory of cars with a new interface, which provides a detailed history of the car right from the ownership period all the way up to the service history of the car, and access to a host of financing options and after-sales products like insurance and warranty. As a result, OLX has witnessed a surge in demand for pre-owned cars. Sapna Arora, CMO, OLX India said, “Green shoots are already visible in the used car retail segment. The demand for pre-owned cars has been 25% higher than the pre-Covid levels while there has been an 82% plus growth in demand for pre-owned smartphones. Our goods category has also witnessed a strong rebound, as demand and supply have gone up by an average of 68% and 25%, respectively, compared to pre-Covid levels. The upcoming festival season is important for us as we expect the gap to be narrowing down between pre and post-Covid levels. There has been a strong uptake of e-commerce across regions, especially in Tier 2 and Tier 3 cities, with consumers there making the greatest shift to online shopping. We will continue to focus on the pre-owned auto segment and are expecting to surpass the demand this festive season.” At an industry level, Arora told us that e-commerce players are leveraging on hyper-personalisation to create individualised experiences on the platform and AI-powered chatbots are being implemented by the online retailers to bring customers close to an offline retail experience with a high engagement rate. Sharing OLX’s plan, Arora added, “This festive season we plan to use innovative solutions via relevant messaging at different levels of the retail journey. Our consumer base is growing organically. During this year’s lockdown, a lot of people moved online and we saw growth, about 30% more daily active users (DAUs) from our previous pre-Covid peak. In the festive season, our huge inventories across segments will contribute to increasing the DAU’s on the platform.” As per Nielsen India’s E-commerce Consumer Panel (E-Analytics Solution), there was a double-digit increase in average spend of online shoppers for electronics and accessories (39%), mobile and accessories (12%), and fashion, including apparel, footwear, and accessories (10%) after the pandemic. Appliances (e.g.TV, WM, refrigerators, etc.) also saw notable shopper spending increase at 9%. E-commerce giant Amazon is also ramping up its product range for the festive season. “Together with thousands of small &amp; medium business and brand partners, we continue to offer our customers the widest selection, convenience, and fast delivery. We are humbled by how millions of Indian customers have made us a part of their daily lives. Also, customers continue to believe that online shopping is the safest way to shop which has been reflecting in all the recent events of Amazon like Prime Day 2021, Great Freedom Festival, Rakhi Store, Onam store and so on. This festive season is not a normal one for reasons we all know and our success metric would be focused on how we can make our sellers successful. Customers can look forward to shopping from a wide selection of products across categories like Home &amp; Kitchen, Fashion &amp; Beauty, Appliances and Smartphones, Grocery essentials and more from the comfort and safety of their homes," said an Amazon India spokesperson. This growth trajectory of e-commerce platforms in India testifies how customers are increasingly recognising the importance of comfort shopping within closed doors, and after seeing their businesses take a plunge in the first three months of the lockdown, more and more sellers are also coming online.

This festive season, e-commerce platforms are betting big on Tier II and III markets, which are likely to contribute $150 million to e-commerce growth this year

<ul><li>The Indian e-commerce industry is grow to $200 billion by 2026.</li><li>The National e-commerce policy earlier had a deadline of being introduced by the end of 2019.</li><li>A recently released consumer protection draft is waiting for comments from leaders.</li><li>The draft e-commerce policy spelt trouble for <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword>, <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>.</li></ul>Indian e-commerce is growing at a fast rate as it moves to reach out to Bharat – the next 200 million internet users in the country. But not all is completely well with this industry which is expected to grow to $200 billion by 2026. From deep discounting to FDI in e-commerce to data protection, there are several concerns that the industry and its consumers have to deal with. Yet, considering the speedy growth of the industry, the Indian government is all set to regulate the sector. It is planning to bring about a National e-commerce policy. A draft policy was introduced in February and recently yet another draft on consumer protection in e-commerce also came in. The government is engaging with industry leaders to include their thoughts in the final policy. The draft e-commerce policy itself opened debate as Walmart-owned Flipkart, Amazon came directly under the government’s line of fire. The draft has not yet been converted into a bill and hence will not be tabled at the winter session of the parliament. However, there could be an overlap with the data protection bill that is a part of the session. The National e-commerce policy was supposed to be introduced by the end of 2019. A recently released consumer protection draft is waiting for comments from leaders The government on November 11 released a draft consumer protection in e-commerce rules. It has been opened up to the public so that e-commerce industry leaders can give their comments on it by December 2, 2019. The draft once again emphasised that e-commerce players cannot directly or indirectly influence the price of the goods or services and must maintain a level playing field. They also cannot falsely represent themselves as consumers or post reviews on their behalf. It also says that every e-commerce player will have to “publish on its website the name of the Grievance Officer and his contact details as well as mechanism by which users can notify their complaints about products and services availed through their web site”. The draft e-commerce policy spelt trouble for Flipkart, Amazon Introduced in February 2019, the draft policy had already gone through multiple rounds of deliberations. While homegrown players like Snapdeal, Paytm Mall have more or less found a safe place in the policy, Flipkart, Amazon and Chinese retailers like Club Factory, Shein are in a tough spot. As the draft, FDI in e-commerce will only be allowed for the marketplace model and not for inventory-based selling. This means that Flipkart and Amazon, will not be allowed to own or sell through any of their entities. Through several meetings over the year, the government has made its intentions clear. In a recent closed door meeting with industry players, Commerce and Industry Minister Piyush Goyal also told Amazon and Flipkart that they must ensure compliance with new foreign investment rules and steer clear of deep discounting. Chinese retailers too will find it difficult to function without having an Indian entity. The policy says that all product shipments from other countries to India must be channelized through customs.. One of the major problems in the e-commerce sector, deep discounting or predatory pricing will be looked into as well. Anti-counterfeiting measures will be taken to curb the growing menace of fake products. Another important point of the policy is the government's insistence that all local data should be stored in India.

India’s e-commerce policy is still in the works – with Flipkart, Amazon on tenterhooks

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">ReutersAmazon CEO Jeff Bezos while on a trip to India</div></div></div>A handful of major US tech companies will be abuzz about India this year. Facebook will persist in <a href="http://www.theverge.com/2016/1/17/10772470/facebooks-indian-free-basics-program-is-stuck-in-limbo">battling net neutrality debates to continue its "Free Basics"</a> internet program there. Google will <a href="http://recode.net/2015/12/14/a-potential-blow-to-googles-project-loon-indian-official-throws-water-on-internet-balloons/">try to convince local officials</a> to let it fly its internet-bearing balloons in its airspace. And, most notably, Amazon will continue to try to conquer its <a href="http://fortune.com/amazon-india-jeff-bezos/">"trillion-dollar" online retail market. </a>In 2016, India will be "the next ecommerce battleground," analysts from Bank of America Merrill Lynch write in a note summarizing all of their new year predictions. Although Amazon made its intentions in Indian known throughout 2015 - <a href="http://fortune.com/amazon-india-jeff-bezos/">participating in</a> <a href="http://www.forbes.com/sites/saritharai/2015/06/04/primed-for-battle/#2715e4857a0b5cef97f21c0e">several profiles</a> and <a href="http://www.businessinsider.com/amazon-growth-in-india-2015-7">commenting on its plans</a> in company earnings calls - this will be a year of increased investments, BofA predicts. Right now there are three big players in Indian ecommerce: Flipkart, Snapdeal, and Amazon's subsidiary there: <div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image"><a title_source="Bank of America Merrill Lynch" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/569bd32ae6183ef15b8b6d35-960/screen shot 2016-01-17 at 9.44.19 am.png"></a>Bank of America Merrill Lynch</div></div></div>Collectively, the three companies have received roughly $7 billion in investment, which is close to the size of the country's entire ecommerce gross merchandise volume in 2014. But the rush to establish market share can be attributed to where the country's ecommerce market is going, not where it is now. Right now, only 20% of India's young population is online. Most <keyword id="6354851" type="ORGANIZATION" weightage="60" keywordseo="Retail">retail</keyword> takes place offline at mom-and-pop shops. But as wireless internet access and smartphone adoption spreads, BofA expects the online shopping market in India to reach $220 billion by 2025:<div class="KonaFilter image-container display-table"><div><div class="image on-image">Bank of America Merrill Lynch</div></div></div>But while 2016 will be marked by big investments, profitability will remain a distant goal. <div class="KonaFilter image-container display-table"><div><div class="image on-image">Bank of America Merrill Lynch</div></div></div> Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/south-koreans-tech-watching-people-eat-online-mukbang-2015-12">This 14-year-old makes up to $1,500 a night eating dinner in front of a webcam in South Korea</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="MwMDZkdzr7V54pSPAwMT1JU7p7MqmuY1" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

Why India is the next 'ecommerce battleground'

<ul><li>The future of e-commerce is Personalised, Transparent and Responsible, says Havas Group Prosumer Report. </li><li>68% of Prosumers expect their e-commerce shopping experience to be tailored through personalisation and AI.</li></ul>The Covid-19 led economic slowdown has been catastrophic for most sectors, barring a few. The e-commerce sector belongs to the latter. The pandemic and its aftereffects led to a complete transformation and a massive surge in the e-commerce sector. Therefore, decoding the ‘Future of e-commerce’ through structural research became a function of paramount importance for us at the Havas Group. Thus, the network announced the launch of its recent Prosumer Report, a global perspective on the future of e-commerce that captures information and insights on the sector, done through the network's proprietary research tool. Drawing on responses from 3,000 consumers from Brazil, China, France, India, the United Kingdom, and the United States, this recently launched survey examines the upcoming trends in the e-commerce experience. Talking about the report, Pritha Dasgupta, CMO, <keyword id="7001513" type="General" weightage="20" keywordseo="havas-group-india" source="Orion">Havas Group India</keyword>, said, “Prosumer is Havas Group’s global report that is released 3 to 4 times every year, each one covering a specific topic. It is one of the longest-running thought leadership properties of Havas Group that has become instrumental in predicting emerging trends in consumer behaviour.” She further added, “Over the last two years, digital adoption has been extremely fast and has become a way of life. If we specifically look at the e-commerce sector, it has become a breeding ground of innovation and in the last two years every leading company in this sector has grown aggressively. Our latest Prosumer Report gives a clear direction to the industry of where this e-commerce sector is headed, and also identifies trends of the sector.” Prosumers are the leading-edge 15-20% of consumers, who are First to the market (usually 6-18 months ahead of the mainstream), Forward-thinking, Influential, Proactive and Socially and/or environmentally conscious. It is this key section of consumers that our research studies. Throughout the pandemic, e-commerce has clearly established itself as the new retail norm as more than 8 in 10 Prosumers tell us they prefer the online shopping experience over the traditional format of in-store purchasing. However, 1 out of 3 respondents claims that their e-commerce experiences are quite boring. Havas Group’s Prosumer report deep dived into the e-commerce sector and came up with a few ways to upgrade the e-commerce experience by: Focusing on new rules of eCommerce: This includes free shipping &amp; returns, seamless &amp; fast delivery, customer ratings, loyalty discounts and purchases recommendations. Having a purpose beyond clicks: e-commerce must be about more than just access, it is about curating products that are good for society. Being on the right side of data history: Privacy is gaining momentum so data education should be mandatory. Expanding from a place to buy to a place to socialise: As e-commerce is becoming more human and is moving to social, making the experience more community-driven will bring results. An over-arching theme that is evident through the research is that the e-commerce sector still has a long way to go to address the gap in consumer expectations. If there is one aspect that the younger generation demands, it is a better consumer experience despite acknowledging the convenience that e-commerce has to offer. For this, the Prosumer report throws light on some rather interesting India specific trends that will go a long way in making the sector shine: <ul><li>The rise in community shopping experience: Post-pandemic, the desire to replicate in-store/mall experience has led prosumers to seek community shopping experiences from the <keyword id="863306" type="General" weightage="20" keywordseo="e-commerce-industry" source="Orion">e-commerce industry</keyword>. In this context, we see a spike in demand for services such as the ability to shop on social media (66%) and the ability to interact with fellow shoppers (68%). </li><li>The era of Transparency: Contrary to popular euphemism, consumers are not averse to data sharing. In fact, they demand transparency regarding what data is being collected. In this context, we see 97% of the prosumers rating privacy as the key attribute and 83% ready to boycott brands that do not have a transparent data collection policy. </li><li>Personalised experience: 68% of Prosumers expect their e-commerce shopping experience to be tailored through personalisation and AI. </li><li>Rise in responsible e-commerce practices: 95% of prosumers demand eco-friendly packaging and 69% want to see e-commerce organisations commit to sustainable practices across the value chain.</li></ul>The Havas Group Prosumer report makes it evidently clear that e-commerce is no longer just about business transactions; it’s about customer empowerment and with the e-commerce market touching $84 billion in July 2021, this is a sector one just can’t ignore. Meeting the needs of consumers will ensure that the e-commerce sector moves from strength to strength. It’s where the future is.

95% of consumers demand eco-friendly packaging; 69% want to see e-com commit to sustainable practices across the value chain: Havas Report

<ul><li>52% of the respondents are spending between INR1,000 and INR5,000 on average on a single transaction on social media.</li><li><keyword id="9597163" type="General" weightage="20" keywordseo="live-shopping" source="Orion">Live shopping</keyword> (39%) and conversational commerce (49%) are gaining popularity in India, as 9 out of 10 people enjoyed the shopping experience.</li></ul> Global data and measurement-driven media agency Essence today unveiled its first-ever <keyword id="623994" type="General" weightage="100" keywordseo="social-commerce" source="Orion">social commerce</keyword> report, which investigates the rapidly growing trend of consumers buying products and services directly on social platforms.The report illustrates the significant opportunity brands have in social commerce, with three out of four people surveyed saying they are likely or highly likely to buy through social media in the future. Social commerce is forecast to <a href="https://www.weforum.org/agenda/2021/05/china-future-social-commerce-content/" target="_blank">account for 13%</a> of total ecommerce sales in China this year. According to the Essence survey, 41% of respondents worldwide made purchases or intend to make purchases involving social platforms. While social media platforms have always provided an environment for buyers and sellers to interact, the survey demonstrates a shift towards organised commerce on platforms. Increasingly, social commerce enables discovery, browsing and purchasing to take place on one platform without the need to interact with any external websites or applications. Ultimately, it creates a seamless experience with fewer clicks and higher potential revenue and conversion rates. Global Trends China, unsurprisingly, is the leader in social commerce, which is forecast to <a href="https://www.weforum.org/agenda/2021/05/china-future-social-commerce-content/" target="_blank">account for 13%</a> of total ecommerce sales in 2021. According to the Essence survey, almost 80% of consumers in China purchased items on social media. Singapore, India and Indonesia followed with 50%, 49% and 48%, respectively. France, Germany and Japan showed the lowest purchasing intent via social platforms at 22%, 27% and 24%, respectively. But despite that low percentage, interest in social commerce is growing in Germany. Almost half (44%) of Gen Z customers in Germany indicated that they purchased or intend to purchase using social platforms. Transaction Value In most countries, the average transaction value on social commerce is higher than the average transaction value on ecommerce transactions. Respondents in Japan recorded the highest average transaction value, between JPY11,001 and JPY55,000 (USD96.74 to USD483.67) for social commerce, followed by the United States, which had an average transaction value between USD101 and USD200. China, on the other hand, had a lower average transaction value between CNY201 and CNY500 (USD31.48 to USD78.30). The higher value transactions look to be driven primarily by men (35%) and by millennials in the 25 to 44 age segment (72%). Both the male and the 25 to 44 age segments are skewed towards the purchase of higher value categories such as hardware, home cleaning, luxury and furniture. Live Shopping and Streaming Social innovations have propelled the growth of virtual shopping. Live shopping and conversational commerce experiences increase the propensity to buy on social media. Four out of five respondents are likely to buy on social media if they have watched a livestream or participated in conversational commerce. Livestreaming has emerged as a major factor in luxury social ecommerce. While the use of livestreaming in ecommerce was primarily centred in the Asian market, it is now commonplace worldwide. Luxury brands including Hermès, Louis Vuitton and Burberry all launched their Fall or Winter 2021 shows by livestreaming worldwide. Brands such as L’Oréal are also driving growth in the luxury beauty segment, partly because social media enables the brand to interact with consumers, influencers, beauty advisers and salespeople on the same platform. These innovations and collaborations are driving sales of luxury items both online and offline. The research indicates that most consumers enjoy the livestream shopping experience, with almost half (43%) of respondents claiming to have enjoyed it and 39% of respondents highly enjoyed it. These statistics held up not only in China, but also in other markets where social commerce is still in its infancy. Globally, 85% of the respondents who watched shopping livestreams report that they are more likely to purchase via social media. Aniket Basu, Senior Director, Technology and Ecommerce, at Essence, said: “We expect that the future of online shopping - and not just social commerce - will be discovery-driven. Customers tend to be exposed to new and innovative products as they browse more on social media or encounter algorithmically mediated recommendations from friends and family on social platforms. Ecommerce is maturing as a field, with social media giving brands and retailers new ways to reach audiences and new growth opportunities. In this environment, social commerce serves as a key future-proofing method for the next five years and beyond.”

Beauty, food delivery and grocery are the most purchased categories by Indians through social commerce: Essence Report

Ten years ago, my mother severed her years-long allegiance with her local shopkeepers and started buying products online. It felt like a historical moment. All her friends and their friends gradually followed suit too. The material force driving this transformation in India's consumer landscape - that kicked off with <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword> in 2007 deciding to sell books - was <keyword id="112217" type="PERSON" weightage="20" keywordseo="Discounts">discounts</keyword>. Since then, this trail mix of coupons, deals and sales has generated its own feeding frenzy and has become a crucial component on every online retailer's entry strategy in India. Apart from being the major driver of sales, discounts have made annual bumper selloffs a staple Indian tradition. Flipkart’s Big Billion Days and <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>’s Great Indian Festival are important for customers, big businesses and small businesses. Millions of products are sold. After Flipkart’s festive sales last year, the gross merchandise value for the industry reached Rs. 9000 crore - approximately $1.3 billion. While a <a href="https://www.bcg.com/en-in/publications/2017/marketing-sales-globalization-new-indian-changing-consumer.aspx">BCG report released last year</a> proclaimed that the price-conscious Indian consumer now prefers convenience over discounts when buying products online, <keyword id="35621" type="PERSON" weightage="20" keywordseo="e-commerce">e-commerce</keyword> firms are still competing in a proverbial race to the bottom. Everyone wants to offer the lowest prices. And what's more, the government has now legitimised this discounting model. The <keyword id="6354751" type="UNKNOWN" weightage="20" keywordseo="income-tax">Income Tax</keyword> Appellate Tribunal, on April 25th, allowed Flipkart to continue recording discounts on its products as marketing and advertising expenses, thereby allowing the e-commerce firm to claim tax deductions on them. Flipkart was appealing a ruling from the Income Tax Department, which said it owed ₹1.1 billion in unpaid taxes for the year ended March 2016. The move will allow India’s e-commerce firms to a sigh of relief while encouraging their loss-leading impulses. On the other hand, it will also ensure that price-conscious consumers keep getting the benefits of heavy discounts on online shopping. The economics of discounts However, there is more to discount policies than meets the eye. The IT Dept, last year, had sought to make e-commerce firms classify these as a “capital expenditure”, which is taxed over a period of 4 to 10 years, as opposed to “revenue expenditure”, which refers to daily expenses that are deductible in the period they are incurred. When Flipkart offers customers discounts, the company absorbs these costs. Its sellers are usually paid in full or charged lower commissions, even though customers don’t pay full amounts for products. Under the IT Department’s proposed classification, Flipkart would not have been allowed to deduct the full value of these costs from its bottom line, which in turn would have increased its tax liability. The IT Dept’s rationale was that since discounts allowed companies to build their brands and retain customers for the long haul, they should be classified as a capital asset - essentially, an asset that provides returns over an extended period of time. However, brand value is largely an intangible cost and hence, it is a subject of confusion. Why it pays to report a loss Flipkart said that it needed to offer discounts on its products in order to achieve greater sales and increase its market share, making these discounts tax-deductible marketing expenses. Under the Income Tax Act, the government does not have the authority to levy taxes on such expenses, which fall under "revenue expenditure". This is precisely why e-commerce firms like Flipkart and Amazon India are reporting losses in the first place - to avoid taxes. These firms offer discounts to consumers in order achieve high sales, and write off these discounts as marketing expenses - leading to a net loss - so that they aren’t liable to pay tax on them. For the year ended March 2017, Flipkart’s net loss reportedly widened by<a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/flipkart-revenues-rise-29-losses-swell-68-in-fy17/articleshow/62761811.cms"> 68% to ₹87.71 billion</a> while sales rose 29% to nearly ₹200 billion. Despite reporting losses, the sales machine keeps on chugging because these firms draw up on the sizeable investments of backers like Softbank Corp, or in Amazon’s case - cash reserves, in order to finance these discounts. If discounts were to be classified as capital expenditure, e-commerce firms would have no reason to offer them and without the discounts, customer demand would plummet,. Under the scanner E-commerce firms have been under the IT Dept’s scanner for a while for availing tax deductions on discounts while reporting high sales. In order to set a precedent for the rest of the industry, India’s income tax authorities had asked Flipkart and Amazon to reclassify their discounts as capital expenses in August 2017. The following December, the IT Dept ordered Flipkart to pay up ₹1.1 billion. Flipkart<a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/income-tax-panel-refuses-to-stay-rs-110-crore-tax-demand-on-flipkart/articleshow/62876893.cms"> unsuccessfully appealed the decision</a> in February 2018, explaining that it couldn’t pay taxes on “fictional” assets, before lodging a renewed appeal with the Income Tax Appellate Tribunal. Flipkart, Amazon and their competitors in the online retail space aren’t only causing headaches for income tax authorities. Physical retailers like the Future Group, Shoppers Stop and members of the Indian Cellular Association (ICA) are finding it hard to navigate India’s retail industry as more and more consumers scour deals online. Earlier this month, the Retailers Association of India (RAI), an industry body that includes Future Group and Reliance Retail, wrote a letter to the Suresh Prabhu, the Union Minister for Commerce and Industry, alleging that online retailer were violating India’s FDI rules by<a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/retailers-seek-action-against-flipkart-amazon-for-violating-fdi-rules/articleshow/63674973.cms"> by lowering prices of products on their websites and illegally funding “abnormal discounts.</a>” Under India’s foreign investment regulations, retailers can only be foreign-owned if they function as marketplaces to connect vendors and buyers, without actually influencing prices. A similar letter was sent by the ICA explaining that e-commerce firms were driving down prices for mobile handsets with direct and indirect discounts, resulting in the closure of mobile retail outlets. The commerce and industry responded by<a href="https://economictimes.indiatimes.com/industry/services/retail/rbi-ed-need-to-look-into-charges-against-e-tailers/articleshow/63839420.cms"> passing the buck on to</a> the Reserve Bank of India and the Enforcement Directorate. A decision is awaited. How long can the party continue? India’s e-commerce industry is relatively young, and growing fast (it is expected to touch<a href="https://www.ibef.org/industry/ecommerce.aspx"> US$188bn by 2025</a>) as more and more consumers get access to the internet and change their buying habits. As a result, e-commerce firms are not focussing on profitability for now. Their overarching purpose is to increase their market share by driving up sales and the number of active monthly customers. However, as opposed to selling everything for cheap, they’re focusing their discounting approach on popular segments like<a href="http://indianexpress.com/article/business/companies/e-commerce-sales-the-economics-of-discounts-amazon-flipkart-snapdeal-big-indian-sale-4651737/"> electronics and clothing</a>. Much like the telecoms industry, where Jio has sparked a price war wherein everyone is trying to undercut each other to hold onto the market, once a number of competitors are forced to leave after burning too much cash, the victor will be in a position to raise prices for everyone. Snapdeal has already become a casualty of the discount war. Now, with Walmart set to<a href="https://www.livemint.com/Industry/YuoY0Iim6xhlBdE7gdz7yL/FlipkartWalmart-deal-on-track-butAmazon-remains-a-contend.html"> purchase a majority stake in Flipkart</a> to take on Amazon, India’s consumers could benefit from lower prices for at least the medium term. Both these entities have a lot of money to spare and are comfortable playing the long game. However, in the event that the Walmart deal doesn’t go through and Amazon ends up joining forces with Flipkart, then the combined company will have<a href="https://www.bloombergquint.com/business/2018/04/08/flipkart-amazon-combine-may-face-close-scrutiny-for-competition-aspects"> a monopoly</a> over the online retail segment- spelling doom for price-conscious consumers. The Indian government is currently in the process of formulating<a href="https://www.livemint.com/Industry/EuTJ9j7Dn4VT5CyrpaZL2J/Framework-for-national-ecommerce-policy-to-be-finalized-soo.html"> a policy framework for the e-commerce sector</a>. It’s goals, however, are conflicting. On one hand, it will try to level the playing field between e-commerce firms and brick-and-mortar retailers and also increase the tax liabilities for online retailers. On the other, it does not want to disincentivise companies from entering the e-commerce space and reduce the industry’s overall competitiveness. It will be a tricky balancing act.

India, your e-commerce discounts are safe

<ul><li>According to Morgan Stanley, as online shoppers mature so does their spending capacity. </li><li>49% of total shoppers having been spending online for less than two years. </li><li>In India, a growing number of e-commerce users come from the Tier II and III cities.</li></ul>When a person moves from physical shopping to online, he or she spends very little in the first two years. And more than half of India’s online shoppers are less than two years old. However, the good news for e-tailers is that from the third year onwards there is an exponential jump in purchases made by the same shoppers. Global investment firm Morgan Stanley’s research has shown that it actually doubles. With the average ‘maturity’ of Indian online shoppers standing at 3.3 years today, there’s only scope for growth of Indian e-commerce. According to a <a href="https://www.pwc.in/assets/pdfs/industries/retail-and-consumer/retail-report-300812.pdf">report</a> done by FICCI and PwC on Indian e-commerce, the Indian retail market is expected to cross $1.3 trillion by 2020. The smartphone penetration in the country has led to the increase in <keyword id="6357762" type="UNKNOWN" weightage="20" keywordseo="online-shopping">online shopping</keyword>. A <a href="https://economictimes.indiatimes.com/industry/services/retail/number-of-online-shoppers-to-surpass-120-million-in-2018/articleshow/64718407.cms">study</a> done by ASSOCHAM shows that the increase in Indian e-commerce comes from “phone shoppers” from the country’s Tier II and III cities. It is this market opportunity that has brought in the bigwigs of global retail to set up shop in India. Walmart with its acquisition of Indian unicorn <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword> is finally aiming at success in the online market. But Walmart also has a massive competition from <keyword id="6354743" type="COMPANY" weightage="20" keywordseo="Amazon-India">Amazon India</keyword>. For Amazon, India is one of its biggest markets which is why it has been pumping in money constantly into the country notwithstanding the losses. And all of this is challenged by India’s Mukesh Ambani. Ambani, who hopes to achieve the same success in e-commerce as his telecom project Reliance Jio did, is <a href="https://www.business-standard.com/article/companies/mukesh-ambani-to-make-e-commerce-debut-during-diwali-s-bumper-deal-frenzy-119030601280_1.html">reportedly</a> looking to enter the e-commerce market during Diwali 2019. See Also: <a href="https://www.businessinsider.in/in-india-amazons-fight-is-not-just-with-flipkart-but-with-paytm-google-pay-and-truecaller/articleshow/67456165.cms">In India, Amazon's fight is not just with Flipkart, but with PayTM, Google Pay and Truecaller</a> <a href="https://www.businessinsider.in/e-commerce-wars-amazons-jeff-bezos-vs-mukesh-ambani-in-india/articleshow/67620116.cms">Amazon's newest challenger may be the richest man in Asia</a>

You Searched For "Ecommerce in India" and got 7 results

This festive season, e-commerce platforms are betting big on Tier II and III markets, which are likely to contribute $150 million to e-commerce growth this year

Karuna Sharma

India’s e-commerce policy is still in the works – with Flipkart, Amazon on tenterhooks

Sanchita Dash

Why India is the next 'ecommerce battleground'

JILLIAN D'ONFRO

95% of consumers demand eco-friendly packaging; 69% want to see e-com commit to sustainable practices across the value chain: Havas Report

BI India Partner

Beauty, food delivery and grocery are the most purchased categories by Indians through social commerce: Essence Report

BI India Partner

India, your e-commerce discounts are safe

Dilsher Dhillon

Over half of India's 120 million shoppers may double their spend this year

Sanchita Dash

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