According to the government, the companies operated at three levels to offer large discounts and were reserving the losses on their books.
Although it is no longer a secret, the government has revealed the nature of the irregularities in which the two main e-commerce companies involved in Amazon and Flipkart are involved, while making fun of the FDI rules. This has come in the form of an explanation given by the government for its decision to stick to the deadline set by it for online companies to adhere to the guidelines.
The government’s explanation exposes the exact process being followed by the two giants of electronic commerce. The government says they were operating hybrid markets.
According to this explanation, the companies operated at three levels to offer large discounts and reserved the losses on their books.
In the first stage, Amazon and Flipkart would buy the products, whether smartphones or other products directly from the manufacturers in bulk and with discounts available. Then, these products would be sold on their B2B platforms to entities in which they had interests at lower prices than those they had bought, thus saving losses on their own books.
These vendors would then offer these products on the respective e-commerce retail platforms. When the customer makes the purchase, there are exemptions from delivery charges, etc. This is the second level where losses are absorbed, to sell the cheapest products. In the third stage, there are money-back offers and other interest-free monthly payment plans to make the offers. absolutely attractive These payment companies are also managed by Amazon (Amazon Pay) and Flipkart (PhonePe).
The prominent vendors in Amazon that are linked to the US company are Cloudtail, Rocket Kommerce and Green Mobiles. At Flipkart, RetailNet, SuperComNet and OmniTech Retail, Truenet Commerce and India Flash Mart sellers enjoy these benefits. Flipkart also has an internal messaging service, Ekart Logistics.
All this has a direct impact on regular offline retailers in the country in the respective segments, since they do not enjoy any of these advantages and that is the reason why the government acted to end these practices. All of these are considered direct violations of the FDI rules.
However, the two companies totally deny that they are in violation of any law. They also deny receiving any communication of this kind from the government. Flipkart seemed to admit that the changes made now can have a long-term impact on your business.