Merchants rejoice comes to end: Flipkart directs sellers to bear 60% discounting cost

Offering discount to consumers and incentives to merchants were well thought strategies to attract consumers and onboard merchants till recently. However, over the past couple of years, both have gradually been evaporating. In a major breakthrough, Flipkart has asked its sellers to burn 60 per cent discount during the sale events.

The e-commerce major will bear the remaining 40 per cent on its own. Earlier, 100 per cent discounting was borne by the homegrown e-commerce major.

The new policy will enable sellers, who contribute a large chunk of sales for the company to continue to offer steep discounts as they are large in size which makes them easier to feed the latest discounting strategies.

Recently, the SoftBank-backed company had been asked by IT department to reclassify discounts and marketing spend as capital expenditure. It had to pay Rs 110 crore penalty to income tax.

Also Read: Income Tax refuses Flipkart’s appeal on tax relaxation, fines Rs 110 Cr

Flipkart had posted a profit of Rs 408 crore for the financial year 2015-16 and reported a loss of Rs 796 crore. In FY 2016-17, it reported a higher loss of 68 per cent at Rs 8,771.4 crore. The revenue of the company, however, grew by 29 per cent and stood at Rs 19,854.6 crore in the last fiscal.

The latest attempt from the Flipkart is said to be an extra push to improve unit economics. While the move will curtail losses for the Bengaluru-based company, it is certainly a bad news for sellers who have been paying high commission and inflated logistics and supply chain expenditure.

Till 2016, Amazon, Flipkart and many other e-commerce firms have been engaged in discounting war for several years. Consumers, as well as merchants, had a great time as the duo keep splurging for acquiring both.

Meanwhile, its arch-rival - Amazon has brought revised seller policies. Under the new policy, sellers will be charged lesser fees to ship products locally, however, they will have to pay higher fees for regional and national shipping.

The reduction in fees is nearly 70 per cent in categories like daily needs and apparel, while it has increased by up to 50 per cent for items like power banks, chargers, shoes among others.

The development was first reported by The Times of India