Festival season sales: E-commerce is battling note ban, GST blues; Paytm Mall may just muddy the waters more

For Indian e-commerce firms, already struggling to shrug off the ill-effects of demonetisation and goods and services tax, this festival season is likely to be crucial. What has made the situation all the more tricky is the entrance of a new deep-pocketed player, Paytm Mall.

Paytm Mall has reportedly earmarked Rs 1,000 crore for the current festival season which will force the top two players or rather the only players in the reckoning so far -- Amazon and Flipkart -- to loosen their purse further so that they do not lose customers.

All this at a time when fear of lower demand due to GST and demonetisation looms large.

"Demonetisation and goods and services tax (GST) have had its impact on every sector. The mood is sombre in the country. Spending patterns are quite low this year in contrast with last year," said Sanchit Vir Gogia, chief analyst, Founder and CEO of Greyhound Knowledge Group, a global strategy and transformation research, advisory and consulting group.

"Demonetisation and GST are hurting everyone," said Paula Mariwala, partner, Seedfund, and Co-Founder, Stanford Angels. According to her, to overcome the pain, e-commerce players will have to resort to all kinds of strategies to remain in the game.

Gogia concurs, "India will spend during the festival time but no matter what e-commerce players will offer by way of discounts, sales wont be high."

Mariwala reckons that as of now, Flipkart is second rung in the game. "But with Paytm's entry, Flipkart will become a struggling child in the e-commerce family," she said.

But is Paytm splurging Rs 1,000 crore on customer acquisition? That is not clear as of now.

However, Amit Sinha, COO, Paytm Mall, has been quoted as saying in a report in The Economic Times: "This festive season, while online retailers will focus on spending money and taking away business from shops in the neighborhood, we will work with them and bring special offers for consumers to shop from their nearby markets by enabling these shopkeepers with mobile technology."