LG, Videocon, Godrej up in arms against deep discounts online

Television and white goods brands LG, Videocon and Godrej are crying foul over their products being sold at big discounts by online retailers Flipkart, Amazon and Snapdeal during festival sales, with some manufacturers suggesting that this is in violation of ecommerce regulations and warning that warranties may not be valid on such goods, reports The Economic Times.

LG and Videocon have cautioned online sellers against such offers and even stopped supplies to a few, said industry executives, as the companies fear the deep discounts that pull prices below cost in some instances could affect their brand image as well as hurt sales through brick-and-mortar stores.

The offline channel is critical to brands as it accounts for 90 per cent of the white goods business.

The manufacturers, which control more than half the market in most white goods categories, said online prices are 10-15 per cent lower than what they offer to distributors and dealers. They feel this may violate rules issued earlier this year that stipulate ecommerce marketplaces cannot directly or indirectly influence prices and they have to maintain a level playing field.

Amazon, Flipkart and Snapdeal denied violating any rules, maintaining that they only provide a platform and that pricing is up to the sellers or brands.

LG issued a letter to its trade partners on 5 October asking them to warn consumers that products sold at lower prices might be counterfeit. Videocon warned its trade partners through WhatsApp groups and emails that online prices have to be at par with those offline or it will cut off supplies. Videocon is also cautioning consumers through advertisements and its website that no warranty is available for LED TVs, washing machines and refrigerators purchased online.

Samsung and Sony, two other big players in the segment, however, said they weren't much affected by online discounts.

Videocon has suspended half a dozen dealers who sold online, while LG too has taken a similar action against some of its dealers, two industry executives told ET.

Manufactures said they are not against online sales but against the pricing. "We are open to do business with online platforms, but they should behave like an alternate sales channel rather than indulge in predatory pricing the way they are doing," said Videocon chief operating officer C M Singh. "It's a possible violation of the government guidelines on ecommerce marketplaces."

Godrej Appliances business head Kamal Nandi said online discounting has destabilised the market this festive season and will dampen offline market sentiment.

 LG India's head corporate marketing Niladri Datta said the company is keeping a close watch. "We are confident that government intervention and regulation would help to pave way to encourage correct selling mechanisms," he said.

Panasonic's sales team has told its trade partners to inform customers through shop-floor sales staff that warranties may not be available on goods bought online, said industry executives. The company did not respond to ET's queries.

Offline retailers feel the ecommerce marketplaces will continue such deep discounting since they are aiming to expand market share. "Online sales below cost price may continue till such time the portals manage to achieve the market share they are aiming for," said retail chain Great Eastern director Pulkit Baid.

Executives said Flipkart, Amazon and Snapdeal had entered into a price war on TV and appliances of large brands since they feel these categories have similar potential like smartphones to drive customer traffic and revenue growth.

The All India Online Vendors Association, a body of more than 1,500 online sellers, said Amazon has started a fee waiver programme for some sellers focussed largely on consumer electronics so that they are able to pass on discounts to consumers.

An Amazon spokesperson said the company charges sellers fees for services like Sell on Amazon, Easy Ship and for logistics that they may choose to use. Snapdeal and Flipkart spokespersons said they ensure sellers sell only new and genuine products, and the terms of warranty support are mentioned. "We stand behind the quality and warranty associated with every product we list on our site," Flipkart said.