Discounts in Russian marketplaces may be limited to 10%

Due to huge discounts in marketplaces in Russia, traditional sellers and their places of concentration - shopping centers - may disappear. This was stated by the Association of Retail Companies (AKORT) in its appeal to the Russian government. As a measure that could support offline stores, the organization proposed limiting discounts for buyers on marketplaces to 10 percent. Experts told MK how justified this requirement is, whether it will help save traditional trade and what will ultimately be more profitable for Russians' wallets.

The Laws of Online Competition under Capitalism

AKORT has asked the Russian government to limit the ability of marketplaces to set discounts on goods of 30-50% at their own expense. Offline retailers see this practice as "price dumping" that will have adverse consequences for sellers, manufacturers of various levels, buyers, and the country's economy as a whole. Members of the Association of Retail Companies believe that if this practice is not stopped, it could lead to the closure of traditional retail outlets, shops, small and medium-sized retail businesses, large centers, and hypermarkets in the future. They insist that the future law "On the Platform Economy" should include a ban on marketplaces investing more than 10% of their annual turnover in the price of goods.

According to economist and top communications manager Andrey Loboda, the current balance of power in the Russian online trading market is such that only two digital platforms — with a white-blue label and with a purple-violet one — have an 80% share. Having become a de facto duopoly, they are trying to “get out” of this cramped status for each of them and become sole leaders. This will allow the one who captures the largest share of the market not only to increase their turnover, but also to receive super profits. To achieve this goal, platforms resort to the so-called “predatory pricing” strategy. To maximize the likelihood of purchasing goods, marketplaces announce surprisingly large discounts on them — both at their own expense and at the expense of the seller. It often happens that the actual price turns out to be lower than the cost price of the goods. Since the beginning of 2024, the average level of discounts on goods presented on domestic marketplaces has grown from 5% to 17%. In other words, every fifth product on marketplaces is sold at a loss. Considering that 66% of Russians or 95.5 million people made purchases on marketplaces in 2024, we can safely say that marketplaces encourage more than half of the country's population to make spontaneous purchases, the expert says.

“Limiting discounts is an attempt to level the playing field between offline retail and marketplaces,” says Yulia Korchagina, founder of the Academy of Business and Strategic Marketing. “Formally, yes, such regulation can slow down the outflow of customers from shopping centers and hypermarkets, which do not have the resources for price dumping. But in essence, this is not about competition, but about artificially restraining a more effective model. If offline cannot offer the same price and convenience as online, then the issue is not about discounts, but about the obsolescence of the model itself.” Limiting discounts on marketplaces can give offline a temporary respite, but will not solve systemic problems: expensive rent, low turnover and rising costs. In the short term, Russians will, of course, feel the lack of discounts more; most have low purchasing power, and price is a key factor in choice. This is especially important for low-income groups, who save on literally everything. But in the long term, the ruin of retail outlets will lead to a decrease in competition, job cuts, and to the fact that online players, in the absence of offline pressure, will begin to dictate prices themselves. Therefore, both will suffer, just in different time frames, the marketer believes.

Who benefits?

According to Natalia Milchakova, a leading analyst at Freedom Finance Global, the practice of limiting discounts is, on the one hand, fair for those retailers who are in a clearly losing position with marketplaces, since they simply cannot participate in setting the price of goods due to the specifics of their business. On the other hand, any limitation of discounts would be unfavorable for buyers and, ultimately, for the country's economy as a whole, since it causes an increase in inflation. In Turkey, for example, the size of discounts on marketplaces is limited, but in this country the inflation rate is one of the highest in the world, and such restrictions are not conducive to an effective fight against inflation. In Russia, if the ACORT proposal is accepted and discounts on marketplaces are limited to 10%, this will still not change the pricing mechanism in other trade formats, except for marketplaces, and buyers will lose, and the decline in inflation that has begun will easily stop.

The bankruptcy of retail outlets, if we are talking about non-chain stores, is a process that has been going on for many years, since many non-chain stores, due to the deterioration of their financial situation and the inability to compete with hypermarkets, are forced to sell their premises or even their entire business to retail chains. That is, the average Russian buyer has already suffered from the reduction of retail outlets. “A way out of this situation could be government support for both formats,” the analyst believes. “In our opinion, marketplaces should not be limited in their ability to sell goods at discounts, but at the same time, it is important to support retail chains, especially if we are talking about small but profitable regional retail chains. For example, it would be possible to introduce a limit on the increase of rent for offline stores in order to reduce costs and, perhaps, even partially subsidize part of the rent for retailers in the event of a sharp increase.”

Of course, from the buyer's point of view, the practice of limiting discounts is unfair: any person wants to be able to buy a product at the best price. "But from the business point of view, I think this initiative is right and fair," Yulia Malyavina, partner at the Digital Step marketing agency, joins the discussion. "The problem with goods on marketplaces is that despite all the rules and requirements of the state, there are still many low-quality, uncertified goods with an unclear composition. And marketplaces, which essentially only provide an online showcase, do not bear any responsibility for the placement of such goods." The situation is different for offline points: they are obliged, among other things, to check the quality of the products themselves, check the declarations of conformity. More inspections, higher fines, stronger control, so the goods there are better and safer, but more expensive. "I believe that Russians will suffer more from the ruin of retail outlets, hypermarkets and shopping centers," Malyavina says. — Most sellers on marketplaces that sell inexpensive goods are small businesses. Small businesses have no opportunity to invest their budget in development, clinical research and the creation of new, improved products. Those brands that are promoted only on marketplaces are a modified copy of well-known and proven formulas, compositions, patterns, etc. Only large companies have the opportunity to engage in research and development, but they cover the costs of this through a higher price for goods. Thus, if dumping by marketplaces is not stopped, this will lead to a reduction in large businesses, which is equal to a reduction in the release of new goods. And as a result, when competition becomes lower, prices on the same marketplaces will still go up. The buyer will definitely not benefit from this, the expert is sure.