BRINGING CLARITY TO ONLINE RETAILING

The recent ‘big billion day’ mega sale offer by online retailer Flipkart saw a virtual stampede in cyberspace, and elicited angry posts on social media by irate shoppers. The massive customer response no doubt helped Flipkart hit the 24-hour sales target inside of 10 hours. With frustrated online buyers giving vent to their ire on social networks, Flipkart founders came out to issue a public apology for the technical glitches and also for their failure to anticipate the discount sale-induced rush into their site, which crashed several times on sale day.

Predictably, the Flipkart sales fiasco has renewed the demand for regulation of online retailers. Discounts are not peculiar to the online trade, though. Festival season-eve extravagant offers are only to be expected, and usually done either to liquidate stocks or create brand awareness. Flipkart and similar online retailers have adopted a marketplace model, where they play the role of a facilitator by providing platforms for sale. In their cases, such offers appear to be intended to ‘buy sales’.

Gross Merchandise Value (GMV) is a key to the valuation of any e-commerce site. How the massive customer discontent impacts GMV run rate in the coming days and valuation for Flipkart is for the founders to figure out. On the face of it, such competitive price-cuts benefit consumers. On a larger canvas, however, these can have serious repercussions not just for the overall health of industries across the value chain but also for society as a whole.

The Flipkart sale experience has raised the issue of how sustainable huge discounts, at times even below cost, can be and how widespread their reach is. It has, not surprisingly, brought the focus yet again sharply on the need to develop a retail ecosystem that prospers without disturbing the social fiber. Consumers need to be wary of such practices as marking prices up and then offering large discounts. Purely from this point of view, one needs to examine the business of retail as it exists today, and as it is set to evolve in the context of the increasing propensity among modern youth to make their purchases online.

A host of issues related to retail from deep discounts to taxation and investments, among others, must be addressed in a composite way so that the retail experience fosters a healthy ecosystem, which rewards all stakeholders suitably and fosters a culture of healthy competition. More than anything else, retail needs an industry tag. That will help define the ground rules, and demarcate the operational areas for trade. Surely, this will go a long way in bringing a sense of clarity, fairness and responsibility among players across the entire retail canvas.