Deep discounting: good or bad for the economy?
Amazon’s chief Jeff Bezos has come to India—which may become the global e-commerce giant’s next big marketplace—saying his firm would invest $1 billion in our small and medium businessess and also help export $10 billion worth of goods made in the country. Such promises for a slowing economy, where small businesses have been the worst hit, should be music to the government’s ears. But a sharp conflict between small traders and giant e-tailers including Amazon and Walmart-owned Flipkart over deep discounting has seen the government giving the cold shoulder to the American giant.
Amazon ended the third quarter of 2019 with a massive $70 billion turnover and a $2.1 billion net income. With their huge buying strength, the e-commerce players manage to get discounts from manufacturers that no retailer in the country, including large retail chains like Reliance and Spencer’s, could ever get. The Competition Commission of India has already started a probe against the e-commerce biggies to see whether their pricing practices are predatory in nature. Similar investigations had also been started by the European Union against Amazon last year.
Many in this country and elsewhere feel the small trader is being muscled out by the Goliaths and would naturally sympathise with the Davids of the marketplace. However, there are others who argue that deep discounting helps consumers get a good price deal and is a global norm that small retailers will have to battle by adopting different strategies, including by turning into ‘specialist high street shops’.
Their point is that just as King Canute could not turn the tide from coming in, punitive actions by regulators would not be able to turn the tide against the new rules of the game. Even if the Amazons and Walmarts were stopped at the gates, Indian copycat e-tailers would play by the same rules, putting at risk the livelihoods of millions of small traders. The way out, they opine, is to regulate without trying to lock the gates against the inevitable.