In order to ensure compliance with the norms in e-commerce, firms like Amazon and Walmart-owned Flipkart are seeking to quell price distortions, making steep discounts less of a possibility.
The e-commerce firms are asking brands to give in writing negotiated, pre-determined prices – also called market operating prices – for products to sellers and certify that any discounts beyond this will be borne by them, and marketplaces and sellers will have nothing to do with it, said executives aware of the matter.
Initiated primarily by the marketplaces, the agreement between seller and brand includes a price guarantee clause. According to this, in case a product is available on another marketplace at a lower price, the seller has the liberty of matching that and the brands will reimburse the difference by issuing a credit note to the seller.
Earlier, sellers used to drop prices by funding the discount to remain competitive.
The automation of the entire process involving maintenance of market operating price, discounts and credit notes has been done to facilitate any audit to confirm that the marketplaces are obeying the revised foreign direct investment (FDI) norms in e-commerce, the executives said.
India allows 100 per cent FDI in e-commerce marketplaces but they can only function as platforms that connect buyers and sellers and cannot influence prices.
Going forward, discounts will be much more regulated, said Ankur Dayal, CEO of Primarc Pecan Retail, a leading seller on Amazon and Flipkart.