Ecommerce

Ecommerce fight :Are the online players doing it within the premise of law (not doing dumping) :

1. because you can expect the price would be lower by 20-30% the offline chains as operating cost and inventory cost and employee cost is lower but in majority of cases like in the recently concluded flipkart billion day sale prices were slashed by more than 70% and we must all agree that it was nothing more than predatory pricing.  
2. Ola provides a guaranteed minimum of Rs2,000 a day to the driver. So he doesn’t mind waiting around in air-conditioned comfort if passengers don’t turn up or give him the slip. Ola can afford it, since it has $65-million in funding. They are able to do this because:-
1. They get cheap funding from VC ,Singapore sovereign fund and VC
2. They don’t have to worry about profitability for now unlike retail listed companies like shoppers stop, pantaloons they are only worried about acquiring customers

But can this work as a business model? 

Meanwhile, we are creating monster consumers with such a huge sense of entitlement that they expect impossible prices and extraordinary standards even from the neighbourhood grocer, who is offering you 24x7 home-delivery for trivial purchases while fighting for survival. 

 “Customers are the king here and you are just the severs,” he says. This frightening sense of entitlement extends even to the free help that people receive from NGOs; and that does worry us. 

Tax issues

After comparing prices with other sites, Amazon recommends the amount of discounts to its sellers on products, but doesn’t force them to adopt these suggested prices. Sellers, however, end up keeping these suggested prices because Amazon finances the discounts. This is how it works: at the end of a certain period, sellers send a debit note to Amazon titled “promotional funding”. This note contains the amount of discount that the seller gave on apparel, electronics, toys and other products sold on the site. Amazon then pays the seller by cheque and in some cases, also gives additional money as the seller’s margin. This debit note is over and above what Amazon collects from the customer. The debit note also includes service tax that the seller collects from Amazon on the amount of the discounts. The seller then pays the service tax to the central government. In effect, the amount of discounts are currently being treated under central service tax laws rather than state tax laws. For instance, if a product priced Rs.100 is sold for Rs.70 by a seller on Amazon, the online retailer will collect Rs.70 from the customer, keep a cut for itself, and give the remaining proceeds to the seller. Then, Amazon will also give the seller an additional amount to account for the discount offered by the seller. This amount could be Rs.30 or lower. This method potentially poses a problem for state tax authorities. Tax is typically charged on the product when there’s a transfer of ownership. In the case of e-commerce, sales tax is collected on the cost of the product and then on the price at which it is sold to the final customer. If a product is sold on a site below the cost price—as it happens in some cases—then the tax collected from the customer is much lower than what was paid originally. In this case, the seller would potentially be eligible to get a tax refund from the concerned state tax department