Big Billion Great Indian fools- how ecommerce companies trick you

E-commerce companies in India have never made profit so far but continue to grow rapidly in terms of volume of sales. Flipkart and Amazon lead the ecosystem with intense competition. Flipkart's Big Billion Days and Amazon's Great Indian Festival are most sought after discount sales during which customers hope to buy big ticket items at lowest prices and save money. 2019 November Flipkart and Amazon recorded 31000 crore rupees worth of sales during their discount sale. [Economic Times]. This year, the volume is pegged at 35400 crores [NDTV report], about 10% more despite the said economic slowdown. While these numbers look impressive, these companies never tell you how much of these sales were cancelled or dispute raised by customer. Social media is full of users complaining their orders getting auto cancelled, receiving defective products and so on. This prompted me to dig deeper into these sales and understand how can they offer products for such a low price. Below are the possibilities

How ecom sites can give so much discount?

Business is done to make profit. No one is running a charity house to give you products for a loss. So if flipkart and amazon sellers are giving impossible to believe level of discounts, how is it possible? Who is taking the loss? How can these companies ever make profit if they sell things so cheap? Below are various ways sellers and online sites trick consumers like you and me to believe we are getting massive discounts.

Trick 01: Artificially increased MRP

Consumers are not very attentive to know real price of a product or keep tracking its price regularly. So increasing price of a product before the sale and then show as if massive discount is being given is the most common trick adopted by online sites. So never believe MRP listed. If you are planning to buy a big ticket item, do track its price for at least 3-4 months on multiple sites to get a fair understanding of reasonable price of that product under normal conditions. This way you can detect if fake discount is offered by means of inflated MRP

Trick 02: Trying to clear defective/damaged products

When sellers are forced to give too much discount, they use the opportunity to get rid of some of their defective products. I have seen multiple scenarios where damaged washing machines, non working printers, used laptops are sold as brand new, without listing their defects. When discounts are huge sellers hope some customers do not mind minor problems. By keeping refund/replacement process too complicated during the sale, ecom sites hope customers don't mind minor issues. Some customers fight back, many might decide to live with defective product which they wouldn't have purchased had they been told about the defect upfront or it was a store visit. So if you are paying too less, be ready for some quality compromise.

Above is an experience of Karthik Murali (anasiantraveller.com)

Trick 03: Forceful cancellation of order

There are multiple instances of ecommerce sites cancelling an order after it was confirmed and tricking customers to re-order the same or other product at inflated price.

Above is the experience of my blogger friend Abhinav Singh (A Soul Window)

Why does this happen? Reasons could be many.

Possible reason 1: Sellers are forced to give unrealistic amount of discounts, which they realize is not profitable. So they list low price to ensure flipkart or amazon doesn't remove them, but since the deal is not profitable at the listed price, use some trick or another to cancel the order.

Possible reason 2: Sellers not getting enough volume. Assume a laptop has MRP of 50000, seller gets it from manufacturer at 42000, after offering some 10% discount, seller sells it for 45000 and makes 3000 Rs profit. Now during mega sale he is forced to give 20-25% discount, which is not viable for him. However expecting huge volume, he convinces OEM/Manufacturer to give him 1000 laptops for just 35000 so that he can give some 20-22% discount and sell it for some 36000-37000. If he gets 1000 orders this deal seems like a killer. But say he gets only 10 orders and OEM refuses to give just 10 laptops for 35000, insists 40000 per unit. Now seller doesn't want to sell for a loss, so he will find a way to cancel the order and save his loss.

There could be many such reason. When you are expecting a product for unreasonable price, expect some trouble because no businessman enjoys taking a loss.

Trick 04: Outright frauds

Super exited you're getting 1 lakh worth iPhone for just 10k? Be ready to receive a piece of brick. Many sellers find it more convenient to make quick money through fraudulent ways. Selling counterfeit products, old/refurbished products etc are quite a possibility as ecom sites do not have a stringent quality control process. They only give a refund if customer creates lots of noise on social media. Otherwise even customer care tries hard to ensure customers do not raise any dispute. Even if two out of 10 customers do not fight back it is easy money for them. If they are banned, they will float another company in another name and re-enter the business. If it heats up too much, at the max they have to give refund, as ecom sites do not have any concept of compensating for customer's loss, waste of time.

Always think "how can this seller give this product for this price". Unless you find a convincing answer, stay away. Buy from a legitimate seller even if it is a bit expensive.

Trick/Method 05: Selling for a loss with marketing budget

Ecommerce companies have huge marketing budget. Sometimes they decide to sell a few products for a loss, just to get free publicity. Like the 1 rupee pen drive, a few units are sold at a loss, funded by marketing budget. If you can get it, great, but you'll have to fight with millions of others who are also trying to order the same thing at low price. Only few units are sold like this, so many will not be able to buy at such low price.

Trick/Method 06: Reduced margins

This is a legitimate way. All stakeholders agree to sell for less margin, anticipating huge volume. Instead of selling 10 units at 1000 Rs profit per unit, if one can sell 100 units for 500 Rs per unit profit then why not (make 50k instead of 10k total). Most festival sales work on this model, but for this to work vendors should have adequate margins on which they can cut a bit and the anticipated large volume should happen. Problem arises when existing margin is wafer thin or not enough sales happen. If you study marketing and get an idea how much margin different sellers have on a product, you will be able to estimate if a discount is realistic.

Remember that business is not run to suffer a loss. No sale is designed to bankrupt the seller. As a consumer we should be ready to pay reasonable price for good products being sold by reliable sellers. Doesn't matter if you pay a 1000 Rs more for a laptop, if it is of good quality and lasts several years. Buy what you need, when you need at right price, instead of buying things you don't need just because they are cheap.

Do share your thoughts. Have you faced issue with your order during a sale? It will be good if Amazon n Flipkart can announce out of that 35000 crore how much order was cancelled by sellers, how many orders received refund/replacement requests. They won't do because the numbers are not pleasing. They are happy impressing investors about massive sales volume they generated during the sale, hoping to get more VC money.

Related: Flipkart refund-replacement experience * Amazon vs Flipkart- My experience *