One-off sales by Flipkart like e-retailers dilute brand value, fear big labels

As Flipkart sold products at throwaway prices on the heavily marketed "Big Billion Day Sale" on October 6, there is an increasing concern among brands that the constant and increasing discounting activities by e-commerce companies is impacting their brand value.

The prices at which Flipkart sold on the day despite being plagued with issues such as price changes, out-of-stock issues, cancellations and website problems, were still very low, prompting some brands to issue statements cautioning customers from online purchases. LG Electronics issued a statement saying it has not authorised any e-commerce company to sell its products. Earlier, issues were raised by brands such as Canon and Sony to curb the excessive discounting by e-commerce companies.

Despite the furore, Flipkart making use of the festive fervour and improving consumer sentiment claims to have sold $100 million in gross merchandise value in a span of 10 hours. Rival Snapdeal also claimed gross merchandise value of Rs 1 crore a minute, totalling to a similar value to its bigger Indian rival.

"These people have gone beyond their brief thinking it is a matter of a day and let us do it and by the time people react, we would have already sold Rs 600 crore," says Harminder Sahni of Wazir Advisors, adding that brands are not likely to take it lightly.

Harish Bijoor of Harish Bijoor Consults agrees. "It seems to be a gimmick by e-commerce player and everybody knows that these operators cannot be selling 10,000 of these phones. He must be selling five of those phones at the price and it is a part of marketing cost," he says.

On the same day, Amazon.in witnessed a 100 per cent rise in sales. "It was our biggest day ever and we believe it is owed to the introduction of Dhamaka deals every hour through the day and ensuring the availability of the deals advertised," said an Amazon India spokesperson.

While Bijoor says that the brands are over-reacting, with regular price wars, purchases become more about the online commerce companies, rather than the brands themselves. And rightly so, on the day of the heavily marketed "Big Billion Day" sale on October 6, the war became more about Flipkart and Snapdeal, and less about the brands that were sold.

Experts suggest that the brand value does get diminished in this case as e-commerce sites tend to brand themselves more than helping sell individual brands. But, this is true both for e-commerce as well as brick-and-mortar stores. "A Flipkart is all about Flipkart," says Bijoor.

Evident from the discount war waged by e-commerce retailers such as Flipkart, Snapdeal and Amazon, where people have bought products left, right and centre, one would not be thinking much about the brand, but the discount that they're receiving.

Flipkart said it sold about 2 million items, or 60 items per second, during the sale, which would also include one TV every second. It adds that it sold some 5 lakh mobile phones and another 5 lakh items in fashion. "So if you buy an LG phone, or a Samsung phone on Flipkart, you tend to say I bought from Flipkart. To that extent the brand identity of the individual item is diminished," says Bijoor, adding that this is a temporary slur and not a long standing one. Sahni agrees. "There is no way that the brand equity of any brand is going to get diluted because of this one-off discount."