In a complaint this week to the Department for Promotion of Industry and Internal Trade (DPIIT), Madras High Court lawyer K Narasimhan has accused Flipkart of influencing prices for select sellers and funding discounts, creating an uneven playing field in the e-commerce marketplace.

Narasimhan claims Flipkart has been offering selective waivers at the product level, directly impacting the pricing of certain sellers. This, he argues, creates a "skewed and non-competitive environment" that stifles competition and hurts the broader seller ecosystem.

Allegations among festive sale

The allegations have surfaced amidst the ongoing annual festive season sale events organized by major e-commerce companies like Flipkart, Amazon, and Myntra. The Confederation of All India Traders (CAIT) has also called for the suspension of these sales, claiming that they further harm domestic traders through the continued use of anti-competitive practices.
Rules and Regulations Allegedly Being Violated

The primary rule that Flipkart is accused of violating is the prohibition on e-commerce companies interfering with or influencing the price of products listed on their platforms. This is enshrined in the Consumer Protection (E-Commerce) Rules, 2020, which were enacted to ensure fair trade practices and protect the interests of consumers and sellers.

The alleged rule violations
Consumer Protection (E-commerce) Rules, 2020: The rules prohibit e-commerce entities from directly or indirectly influencing the sale price of goods or services offered on their platforms.

Competition Act, 2002: The Act prohibits anti-competitive agreements and abuse of dominant market position, which could include predatory pricing or discriminatory practices.
Foreign Direct Investment (FDI) Policy: The policy for e-commerce marketplace entities restricts them from influencing the selling price of goods and services and mandates a level playing field for all sellers.

E-commerce companies' defence

Flipkart has not yet responded to the allegations. However, e-commerce companies typically argue that discounts and promotional offers are essential for attracting customers and driving sales, especially during the festive season. They also claim that these practices benefit sellers by increasing their visibility and reach.

If found guilty of violating the Consumer Protection (E-Commerce) Rules, 2020, Flipkart could face penalties under the Consumer Protection Act; penalties may include fines and imprisonment for the individuals responsible.  
This is not the first time that Indian e-commerce majors have faced scrutiny for their business practices. In the past, both Flipkart and Amazon have been investigated by the Competition Commission of India (CCI) for alleged anti-competitive behavior.

The allegations against Flipkart have once again brought to the fore the concerns about the dominance of large e-commerce companies in the Indian market and their impact on small and medium-sized businesses. The government and regulatory authorities are likely to face increasing pressure to take action to ensure a level playing field for all players in the e-commerce ecosystem.

As the festive season approaches, major e-commerce players like Flipkart and Amazon, along with direct-to-consumer brands, are preparing to tighten their return policies. This move aims to maximize profits and minimize logistical challenges during a period known for a surge in returns.

Experts predict that product returns for categories like fashion, accessories, home decor, and kidswear could be more difficult this festive season. Companies are looking to eliminate the costs associated with reverse logistics, staffing, and packaging, which can significantly impact margins.

High returns during festive season

As per Return Prime, a returns and exchange optimization platform’s estimates product returns can be as high as 30 per cent during the festive season, which typically sees a spike in e-commerce sales. And estimates suggest product returns could cost Indian e-commerce companies a almost $20-30 billion in revenue by 2025. The problem is further compounded by the fact that the rate of returns doubled during the pandemic, despite a 38 per cent growth in e-commerce sales.

What’s more fashion category sees the highest number of returns, followed by groceries and personal care. Impulsive buying driven by attractive festive deals often leads to buyer's remorse and subsequent returns. The cost of reverse logistics, which includes everything from product pickup and shipping to quality checks and refunds, can significantly impact profit margins. Industry experts estimate that returns can account for 10-12 peer cent of the entire product cost, leaving brands with slim earnings.

Steps to discourage returns

To counter returns, companies are reportedly considering a range of measures, including shorter return windows, imposing fees on frequent returners, restricting refunds to store credits, and limiting cash-on-delivery options. While e-commerce companies are keen to curb returns, they are treading cautiously to avoid alienating customers. Returns and replacements remain key drivers of online sales, with many consumers prioritizing the option to return products when shopping online. Any drastic policy changes could negatively impact sales, as eliminating returns entirely could lead to a 50 per cent drop in gross merchandise value (GMV).

E-commerce companies are exploring various tactics to reduce returns:
• Shortening the return window
• Charging a return fee for frequent returners
• Offering only store credit instead of refunds
• Disallowing payments at the time of delivery

Some sellers may also choose to be lenient with loyal customers while restricting return options for others. Platforms like Nykaa and Myntra now charge customers a platform fee to offset potential return expenses. However, the effectiveness of such measures in balancing customer satisfaction with profitability remains to be seen.

Overall, the festive season is likely to witness a subtle tightening of return policies as e-commerce companies seek to protect their margins in the face of increasing return rates. While the industry grapples with this challenge, customers can expect a more cautious approach to returns and exchanges in the coming months.

With the value fashion segment gaining momentum, the fashion retail sector in India is expected to witness a demand recovery with revenues rising by 15 per cent in FY2025, as per ICRA.

After nearly two years of slowdown, the value fashion segment in India is showing signs of recovery with average sales per sq ft surpassing pre-COVID levels for the first time in Q1 FY2025. This resurgence is marked by increased activity, as large corporations either enter the market or expand their presence aggressively.

In contrast, average sales per sq ft in the premium fashion segment declined by 3 per cent in FY2024 and Q1 FY2025, while the value segment thrived, surpassing pre-pandemic figures.

Revenues of Trent Retail, operator of the value fashion brand Zudio, rose by 56 per cent during Q1 FY25, along with a substantial profit rise of 126.3 per cent. Zudio also opened 203 new stores across 46 new cities, bringing its total to 545 locations.

Zudio is now a formidable competitor to Landmark Group’s Max. In response to market trends, Shoppers Stop has launched its new value format, InTune, in the mass premium segment, planning to open 60 new stores in FY25. Meanwhile, Reliance Retail’s value fashion brand Yousta is negotiating with British retailer Primark to potentially launch in India.

Japanese fashion retailer Uniqlo has introduced the UTme! India Art Project to showcase designs from emerging Indian artists. This marks the first time Uniqlo has collaborated with Indian artists to create unique designs for their UTme! T-shirts and tote bags. The exclusive collection will be available at Uniqlo’s Ambience Mall Vasant Kunj store in New Delhi
Collaborating with talented local artists on this collection helps the retailer further its commitment to the Indian community and celebrate its diversity, says Nidhi Rastogi, Marketing Director, Uniqlo India.
UTme! offers customers an opportunity to design their own Uniqlo T-shirts by selecting from a range of stickers available at the UTme! Machine. The designs are printed on-site, allowing customers to personalise their T-shirts and tote bags in just 20 minutes. Additionally, the sotre also sells pre-printed T-shirts featuring the new designs.
Uniqlo entered the Indian market in September 2019, opening a flagship store in New Delhi's Ambience Mall, Vasant Kunj. It now operates eight stores in Delhi NCR, two in Mumbai, and one each in Chandigarh, Lucknow, and Zirakpur. The brand plans to open six to eight more stores in Mumbai and Pune over the next two years and is negotiating with several major malls in these cities.

In the centre of India's ever growing e-commerce landscape, Amazon India has observed a silent transformative trend: the rise of premiumization in Indian fashion and apparel retail. An in-depth look at their own sales data reveals evolving consumer preferences and regional nuances. The study highlights the rise of premium brands and growing appetite for high-quality fashion across states. “The premiumization trend in India is undeniable. Consumers are increasingly seeking high-quality, branded products, and are willing to pay a premium for them," says Amit Agarwal, SVP and Country Head, Amazon India.

Growing demand for premium fashion

Amazon India's data reveals a growing appetite for premium fashion and apparel brands among Indian consumers. The platform's premium segment has witnessed a significant sales increase, indicating a shift in consumer preferences towards higher-priced, quality-focused brands. And the pattern of sale changes across states. While major metros like Delhi, Mumbai, and Bangalore remain big contributors to overall fashion and apparel sales accounting for over 60 per cent of fashion and apparel sales on Amazon India.

Tier-II, III cities are showing rapid growth almost contributing nearly 40 per cent to overall fashion sales, driven by increased internet penetration and rising disposable incomes. Ethnic wear remains a popular choice across India, accounting for over 40 per cent of overall fashion and apparel sales on Amazon India. Manish Tiwary, Vice President, Amazon India points out, "We are witnessing a remarkable shift in the fashion landscape in India, with a growing preference for premium brands and a surge in demand from diverse states across the country. Amazon India is committed to providing a platform for both established and emerging brands to reach a wide customer base."

States like Maharashtra, Karnataka, and Tamil Nadu have emerged as fashion-forward states, displaying a higher inclination towards premium brands and trendy styles. These states also exhibit a preference for ethnic wear, reflecting the strong cultural influences in these regions. What’s more, over 70 per cent of fashion purchases on Amazon India are made through mobile devices, reflecting the country's digital-savvy consumer base.

Growth potential in smaller cities
There study points out, there has been a rise in homegrown luxury. Indian luxury brands like Sabyasachi and Anita Dongre have witnessed exponential growth on Amazon India, catering to the increasing demand for premium ethnic wear. At the same time, luxury brands like Louis Vuitton, Gucci, and Prada have witnessed significant success on Amazon India, with a growing number of Indian consumers opting for these high-end brands.

Cities like Jaipur and Lucknow are witnessing a surge in fashion consciousness, with consumers actively seeking out the latest trends and premium brands. And fashion influencers are playing a pivotal role in driving sales, particularly among younger consumers, who look to them for style inspiration and recommendations.

Amazon India's findings highlight the evolving fashion and apparel landscape in India. The growing appetite for premium brands and the rapid growth of Tier-II, III cities present significant opportunities for both domestic and international brands. As India's e-commerce market continues to grow, fashion and apparel brands need to adapt their strategies to cater to the changing consumer preferences and regional dynamics.