Deep discounts by e-retailers not sustainable: PwC
16 Feb 2015
Apart from convenience and a wider choice, the biggest attraction of e-commerce companies is the big discounts they offer - but these deep discounts may not be sustainable as they are eroding bottom line for the fast growing sector, says a PricewaterhouseCoopers report.
According to the report by the global research and advisory firm, e-commerce companies have incurred combined losses of over Rs1,000 crore.
''Offering lower prices will not be viable in the long term. Despite luring customers in the initial stages, lower prices won't be able to retain customers in the long run. While the discounting will continue for some more months, e-tailers are thinking beyond discounts to acquire customers and build loyalty,'' the report said.
No time-frame for the losses was mentioned. However, e-commerce companies have been under fire from various trade organisations and tax authorities in recent times over their heavy discounts. E-commerce companies, led by home grown Flipkart, have raked in millions of dollars in private investment in recent times.
Out of a total of 1,005 respondents surveyed as part of the PwC study from India, almost half said they preferred to shop online due to better deals and discounts on offer.
''A majority of e-commerce players are start-ups, and therefore are working towards rapidly scaling up their market share. They have been aggressively planning and implementing discounting strategies, which would make the customer sit up and take notice,'' it said.
The PwC report said the 'predatory' pricing strategy of e-commerce companies isn't helping their stand with the premium brands.
It found that with valuations of e-commerce companies skyrocketing, there is increasing pressure from investor firms to cut down on discounts and concentrate on making profits, the PwC report pointed out.
