Tuesday 28 October 2014

Know How Flipkart Snapdeal and Amazon Are Funding Discounts!

Online shopping is a rage of late. Owing to the busy lives of people, most do not have time to go to shops every now and then whenever they need to. In these case, online shopping comes as a very convenient option.

The cash on delivery facility is a huge hit in addition to the popular payment modes through credit or debit card options. People are lured in buying online even more due to the attractive discounts that they give. The most popular online shopping sites are Amazon, Flipkart and Snapdeal. People have built a trust on these sites and they strive to provide effective and competent services to the customers so that they can keep the much needed trust.

The attractive discounts count for the exponential sales on these sites. Here, we will be looking into how Flipkart, Amazon and Snapdeal funds the discounts that they frequently give to the customers.

How they Fund the Discounts

Flipkart, Amazon and Snapdeal essentially work as marketplaces. No FDI is imposed on e-commerce in India and these sites make use of this policy itself. FDI is imposed only on those sites, which engages in linking buyers and sellers.

These sites fund the discounts using strategies which are extremely complex and make use of the fact that FDI is not applicable everywhere. The sites see to it that they incur maximum profit by making proper use of the different financial policies of the Indian law.

Even though these sites do not have the power to completely decide on the price or discount on a product, the sites have established for itself a platform where they can make such decisions, owing to their popularity and strength of their business in the market. Most of these sites do not breach laws because their business greatly depends on the reputation they maintain.

These firms deal with the customers directly in these cases. In these cases, it is seen that the site selling the goods keeps a cut for himself from the discounted price and returns the rest of the proceeds to the actual manufacturer of the item.

In case of e-commerce tax is collected on the actual cost of the product and at the price at which is finally sold to the customer. If the customer pays a lesser amount then the tax collected is lesser than what actually must be received if the discount wasn’t allowed. In such cases, thus sellers become eligible for getting a tax refund from the tax department of that particular state.

Online shopping is highly dependent on the discounts given on the various products. These discounts are a testament to show how these sites invest the large amount of money that has been raised from the investors.

An adverse effect of providing such discounts is that the brick and mortar shops are getting highly affected. They have to maintain their establishment costs and thus cannot provide such huge discounts. Shoppers on the other hand are going for profitable discounts available on the Internet.

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