E-commerce companies have incurred combined losses of around Rs. 1,000 crore due to heavy discounting strategy and this model is not feasible in the long run, a PwC report said.
“Offering lower prices will not be viable in the long term. Despite luring in 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. The combined losses faced by e-tailing companies as a result of their discounting strategies now stand at almost Rs. 1,000 crore, the report said without giving the time frame for these losses.
Out of a total of 1,005 respondents surveyed as part of the PwC study from India, almost half the respondents said they preffered to shop online due to better deals and discounts offered by these retailers.
“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.
Pointing out that price has emerged as the biggest differentiator driving consumers to shop online or in-store, it said the customer habits have changed, as they are used to discounts throughout the year. 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.