Quick commerce platforms have come under increased government scrutiny, with recent reports indicating that officials are seeking more transparency on various aspects, including the ownership structure of dark stores.
The AICPDF mentioned that the predatory pricing and deep discounts by the quick commerce platforms are harming domestic traders in the country
Quick commerce platforms have come under increased government scrutiny, with recent reports indicating that officials are seeking more transparency on various aspects, including the ownership structure of dark stores.
To add to it was the open letter by the All-India Consumer Products Distributors Federation (AICPDF), which highlighted that the deep discounting practiced by these platforms ends up hurting the market value. In the letter, the AICPDF asked the FMCG industry to closely monitor the impact of the quick commerce platforms on their distribution and retail networks.
Interestingly, this coincides with the upcoming festive season sales of Flipkart and Amazon, both starting on September 27. Flipkart's Big Billion Days offers discounts ranging from 50 per cent to 80 per cent. For instance, Apple’s iPhone 15 is available at Rs 49,999, inclusive of bank offers and exchange rates. The original MRP of the phone is more than Rs 75,000.
Because of the sale, which already started today for select users, one out of four Indians will visit Flipkart, as per a Business Standard report. Meanwhile, Amazon’s Great Indian Festive Season sale will start on September 27 with several flash sales and limited-time deals.
The steep discounts offered on these platforms make the case for predatory pricing against them stronger. The recent statement by Union Minister Piyush Goyal was one where he accused Amazon of practicing “predatory pricing".
In August this year, Goyal said, “Are predatory pricing policies good for the country? ... I don’t see it as a matter of pride that half our market could be driven by e-commerce 10 years from now. It’s a matter of concern.” To add to it was the recent statement of BJP MP Praveen Khandelwal, who urged Goyal to suspend the festive season sales of these platforms as it would harm small traders.
Amid the increasing scrutiny on these platforms, the AICPDF also mentioned that the predatory pricing and deep discounts by the quick commerce platforms are harming domestic traders in the country.
The association said in its open letter as per PTI, “These practices not only undermine the integrity of the established distribution network but also erode brand value.” By creating unrealistic consumer expectations around pricing, the brand value is eroded, it said.
As a result, the AICPDF highlighted that the FMCG companies should regulate these pricing strategies and protect their brand value. The union commerce and industry ministry received the complaint from the AICPDF. Additionally, the FMCG Distributor has highlighted that these platforms are engaging in anti-competitive practices.
As per PTI, the federation is also planning to launch a formal complaint to the Competition Commission of India (CCI) about the same. This comes at a time when an anti-trust probe is already going on against Flipkart and Amazon by the CCI.
Currently, the quick commerce industry has a market size of $2.8bn, as per Redseer Strategy Consultants. A NIQ Shopper Trends 2024 released on September 20 indicates that quick commerce is used by 31 per cent of urban consumers for primary grocery shopping.
Amid the rapid penetration of platforms like Zepto, Blinkit and Instamart, there is no doubt that FMCG companies are engaging with these platforms. Several FMCG companies have also attributed quick commerce platforms for their growth.
Mohit Malhotra, CEO, Dabur India, said in an investor call, “Quick-commerce is now 30-35 per cent of our overall e-commerce business. We are working with all the major players in this space and devising product mix and portfolio. This is a very high growth channel for us.”
Sunil D’Souza, managing director and CEO of Tata Consumer Products, recently mentioned during an earnings call that overall e-commerce has experienced significant growth, with a notable increase in quick commerce. He highlighted that e-commerce is growing at 61 per cent, with around 35 per cent of that growth attributed to quick commerce.
A report published by Elara Securities in April this year revealed that quick-commerce platforms contribute 1-2 per cent of sales for major FMCG brands, while for smaller brands, this figure rises to 7-8 percent.
Flouting Norms Calls for Broader Investigation
As mentioned before, the surge of these platforms has also called for increased scrutiny of these platforms. The AICPDF also earlier wrote a letter to Goyal where they highlighted that these platforms have been creating an uneven playing field, which in turn affects small retailers and distributors.
The federation also asked the government to see if these platforms are flouting FDI rules in the country. It reportedly said, “The FDI rules clearly prohibit e-commerce entities operating under the marketplace model from holding inventory or exercising control over the inventory sold on their platforms.” The AICPDF further mentioned that these platforms might be blurring the lines between a marketplace and an inventory-based model, thus potentially violating FDI norms of the country.
The government did ask the quick commerce platforms to throw more light on the dark store ownership. A source told the Economic Times that government officials are assessing whether the platforms comply with regulations regarding the operation of dark stores, particularly in terms of ownership. This comes after these platforms secured foreign funding in recent months.
The Ministry of Consumer Affairs is also reportedly in the process of finding out the impact of quick commerce platforms on Kirana stores. A senior official told Business Standard, “We have to find a balance between consumer satisfaction and different stakeholders to find the best possible solution for the issue.” Additionally, reports suggest that the CCI will also ask market players such as the Retailers Association of India (RAI) to understand the impact of quick commerce on kirana stores.
While a lot has been discussed about the ongoing investigation into quick commerce platforms, now the question that arises is: where to draw the thin line between the quick commerce boom and anti-competitive practices, a question that can be answered only after investigations are concluded.