Tax issues in UP, Uttarakhand drive away ecommerce companies Flipkart, Amazon, Snapdeal

In July this year, IOS had reported about the delivery nightmares that are keeping ecommerce firms away from Noida and UP.

Latest news is that besides these delivery woes and certain rules & regulations, ecommerce firms are being harassed too by the tax authorities. The result:Amazon, Flipkart, and Snapdeal have nearly stopped delivering productsexceeding Rs 5,000 in UP and Uttarakhand.

The Tax Issue

At present, buyers from these states have to file a VAT declaration for every purchase above Rs. 5,000 from other states. The state tax authorities follow this rule strictly and hence goods have been seized in many cases.

This is why ecommerce biggies have stopped making deliveries.

An official from Flipkart revealed to ET, “Owing to these statutory restrictions imposed by the UP government, we do customer deliveries for shipments only up to Rs 5,000, which is for interstate shipments.”

Another ecommerce official whose identity is not disclosed reasons, “The requirement of the UP government to ask for way bill forms (Form 39) from end-users, even though the consignments that are brought in are for self-consumption, is leading to recurrent incidences of seizure for both prepaid and postpaid cash-on-delivery consignments.”

He added, “Since the tax liability on these is already being discharged by the seller in the state from where the shipment has originated, such tax demands are unfounded and restricting marketplace deliveries in this market.”

Tax officials and ecommerce companies lock horns

Ambiguity over types of taxes, rules & regulations that should govern ecommerce entities is the core reason for such a complicated situation. The battle between Amazon and Karnataka Tax department is one such example.

What can help to resolve it?

No prize for guessing, upgraded policies designed especially for the ecommerce industry will help to resolve this situation. Experts believe that the implementation of GST (Goods & Services Tax) is the answer to this problem. GST is touted as something that will put an end to the tax woes, eliminate the root cause, and help the ecommerce sector to grow.

Big Guns of Ecommerce, Amazon, Flipkart & Snapdeal battle it out for the top position

Indian ecommerce industry can be easily described as a complicated and exciting maze where Amazon, Flipkart and Snapdeal are the top three maze-runners. All three online marketplaces are trying every tactic there is to outrun each other.

Whether it is announcing deals or acquiring companies, Amazon, Flipkart and Snapdeal are going neck-to-neck.

Here’s a look at various strategic moves taken by the three biggies in the recent times, which is enabling them to stay in the top three and fight it out.

Raising funds

As the ecommerce sector in India is still at a nascent stage, maintaining proper flow of funds is of utmost importance. The three etailers know that. Flipkartraised $1.7 billion funds in July this year, Snapdeal bagged $500 million in Augustand Amazon Inc pumped in $2 billion last year in its Indian arm.

Festive Sales War

IOS gave you a running commentary of the recently concluded festive season sales marathon in which Flipkart was the winner, followed by Amazon and Snapdeal. Read about how Flipkart, Snapdeal, Amazon fared in the 5 days.

Luring Sellers

In the last one year or more, there has been no dearth of seller initiatives by online marketplaces. Whether it was offering incentives during festive sale,assisting sellers, monetary support or investing heavily in seller services, the three players are trying their best to become every online seller’s choice.

Mergers & Acquisitions

Series of acquisitions took place, namely by Snapdeal and Flipkart that revived their market leadership position. Key ones have been Snapdeal-Freecharge, andFlipkart-Myntra.

Besides the above mentioned points, ecommerce leaders have focused on expanding their product & service offerings and reserved capital for ad spends. With mobile platform presented as the next battleground for ecommerce, the top etailers started investing in technology to gain competitive advantage. Right from building artificial intelligent brain to setting up technologically advancedwarehouses with robots, efforts are being made to improve ecommerce technology.

Are any of them making money?

No. Reaching profitability is on every ecommerce players mind but looking at the losses the top marketplaces are making it doesn’t look easy. So out of Amazon, Flipkart and Amazon, whoever manages to reach profitability first will be the winner.

Sumchit Anand, MD of Acquisory Consulting correctly states, “While it is very clear that Flipkart, Snapdeal and Amazon are the market leaders, the jury is still out on who will turn out to be the winner. The one who starts making money will be the winner. Look at the airlines industry; while most airlines are bleeding, IndiGo has emerged as the winner because it managed to start making money.”

Snapdeal giving Flipkart a run for its money this Diwali

If last years Diwali sales seemed like a 100 metre sprint, than this years festive sales are surely a marathon. Of course it makes perfect sense! More sales equals more revenue! The strategy taken by ecommerce biggies to celebrate every festival in the calender right until December will boost Gross Merchandise Value, in their push towards profitability.

Memorable Monday

The similarity in tactics of Flipkart and Amazon to have their respective sales, namely the Big Billion Days sale and the Great Indian Festive sale on the same days did not go unnoticed. Snapdeal on the other hand decided to buck the trend and start one day earlier with its ‘Electronics Monday’ sale. Keeping with the Monday theme, Snapdeal has decided to have an online sale each Monday until Diwali.

“Million of users try e-commerce for the first time during the festive season and we are delighted to give them a fantastic first experience on our marketplace. Over the last year, we worked single-mindedly to deliver world class customer experience this Diwali,” said Rahul Taneja, Snapdeal’s vice-president (category development).

Aiming for the top spot

Snapdeal’s overall plan is to grow seven times sequentially over the festive period in order to overtake Flipkart by the end of the fiscal. So far the early signs are looking promising.

• Overall sales grew 10 times during the festival sales week
• Fashion category was up by 12 times during the sales week
• Furniture category was up by 20 times during the sales week

“We have beaten every benchmark we had set for ourselves during the just concluded Diwali week, be it the number of consumers shopping, average purchase value or the delivery experience. We have also gained market share significantly,” said Rahul Taneja, Snapdeal’s vice president (category development).

Time to deliver

In its race to the finishing line, Snapdeal is looking to exploit its exceptional back-end logistics, which includes its recent investment in Gojavas. Also with the additional 1.3 million square feet floor space built this year, Snapdeal is now delivering 60% of its orders from its own 63 fulfilment centres, which are sprinkled over 25 cities.

• Snapdeal has already dispatched over five million packages from last week’s sales orders
• More than 98% of orders were dispatched within the first 24 hours

Podium finish

While Snapdeal is ambitiously working hard for the top spot this year, it is confidently on target for at least a podium finish. However the recent talk of established global ecommerce marketplaces like Alibaba and also renowned Indian business houses like Reliance, about to make a big splash in the ecommerce scene, could paint a vastly different picture this time next year.

Flipkart, Amazon watch out: Mukesh Ambani set to join e-commerce business

Mukesh Ambani-led Reliance Industries on October 26 said that it is going to launch its e-commerce portal for fashion and electronics by 2015 end, according toQuartz India reports.

While announcing its earnings for July-September 2015 the company said in a press release, “Reliance Retail 2.0 initiatives encompassing fashion and lifestyle e-commerce, development of marketplace platform and building distribution ecosystem for Jio devices are on track and gearing up for rollout in a staged manner."

Executives of the company told that Reliance Industires' e-commerce platform will have 150,000 vendors

With most of the e-commerce portals being led by young entrepreneurs, the 58-year old chairman is going to give a tough competition to them. 

Reliance already has an apparel store-Reliance trends spread across the country. 

According to Quartz India, Reliance Jio, RIL's telecom venture will be of great assistance to the company's online retailing plans through its mobile wallet, Jio Money and 4G telecom services.

The e-commerce portal is going to collaborate with international brands from Singapore, Australia, Russia, Switzerland, China and Turkey. 

Apart from apparels, the company is also going to sell electronics which will offer all devices that are sold by Reliance Digital. Reliance also runs its online grocery retail business which is restricted only to Mumbai.

Comparing RIL's target of having 150,000 vendors, the already existing portals, Flipkart has only 40,000 vendors and targets 100,000 sellers by December 2015, Amazon India has around 50,000 sellers which started operating from June 2013 and Snapdeal has around 200,000 sellers, according to Quartz India.

Flipkart, other e-comm platforms may soon sell mutual funds

As an ever-growing number of consumers flock to e-commerce websites for their shopping needs, regulator Sebi is considering allowing the sale of mutual funds through these platforms to deepen this market.

The mutual fund industry has been growing considerably over the last few years and currently has assets under management of over Rs 13 lakh crore, but it has been felt that a huge growth opportunity remains untapped especially among the retail investors.

To make it easier for investors to buy mutual funds in a cost-effective manner, the Securities and Exchange Board of India (Sebi) is now looking into suggestions to allow sale of these schemes on e-commerce platforms, sources said.

Sebi chairman U K Sinha, who also headed UTI Mutual Fund before becoming chief of the capital markets watchdog in 2011, recently met representatives from e-commerce and other technology platforms.

The meeting was also attended by Nandan Nilekani, former UIDAI chairman and a co-founders of IT giant Infosys, along with representatives from Flipkart, PolicyBazaar, BankBazaar, Scripbox, FundsIndia, Perfios and Eko, among others, as also by some fund houses and senior Sebi officials.

Sebi is of the view that a greater use of Internet as a distribution channel can help increase the penetration of mutual funds, especially among the young investors, and also reduce the cost of buying mutual fund schemes.

Currently, investors can buy mutual funds directly or through distributors or agents. Investing directly is cheaper than going through intermediaries as customer is not required to pay fee to the distributors. Fund houses also allow sale of their products online through their own websites.

A number of fund houses are already focusing on 'direct plan' mode to sell their schemes, a move that may maximise the returns for the investors as against regular plans involving distributors.

Since no fees need to be paid to distributors, expense ratio gets lower in direct plans, which eventually leads to higher returns for the investors.

Besides, Sebi discussed measures for simplifying the on-boarding process of retail investors. It noted several ideas to remove in-person verifications (IPVs), speeding up the KYC (Know Your Customer) processes via KRAs' (KYC Registration Agencies).

To streamline the distribution model for increasing the retail investors' base, Sebi is looking into measures to enhance investor trust, lower cost of customer acquisition and provide for an online only distribution model.

Furthermore, the markets regulator is in talks with fund houses to allow investors to invest in mutual fund products by using the Aadhaar number.