11.11.2014 was an exciting day for online retail and shopping
enthusiasts. After an impressive opening at the NYSE, Alibaba and Jack Ma have
been in the headlines for all the right reasons. The Singles Day sale on 11th
November was like a show of its might and abilities to deliver and grow year on
year. The numbers are simply mind boggling- $9.3 billion in sales with 278
million orders shipped in 24 hours. The figure is a significant rise from 150
million orders shipped last year, which again was a massive improvement from a
year ago. It has shown exponential growth in sales and traffic over the past
six years. Surely enough, the Chinese dragon is making its presence felt around
the globe.
While all this was happening in China, on the very same day,
Snapdeal and Amazon were looking at causing a few ripples in the Indian market.
Snapdeal Savings Day was being heavily advertised for four days preceding the
sale. To keep the shoppers interested, they put up a listing of all the range
of products which would be up for grabs on the day and complete with hourly and
limited time sale across categories. It seemed to be a well charted approach
with special discounts or cashbacks on use of certain cards or modes of
payment.
Parallel to them was the Amazon Appiness Sale- an exclusive
sale for its mobile app customers and targeted towards increasing the number of
mobile based internet users shopping via its app. But this also had a lot of
attractive offerings like the chance to win 11 months of free shopping worth Rs
11,000 each month if one buys through the application.
Both the retailers seemed to have their marketing hats on and
trying to ride in the mass wave of consumerism that has set in India. But coming
hot on the heels of Flipkart Big Billion Day debacle, as an enthusiast and
online buyer, I was really interested in how these two giants fared in
comparison. With not much to buy available under the ‘Sale’ tag, I was happy to
just a spectator and gather information and understanding. Sadly, the reports
were not really encouraging.
Snapdeal Savings Day went on much the same way as Flipkart.
The social media channels were buzzing about problems right from site not
opening to payment gateways unable to check out orders. Comparisons came up
rapidly to the extent where people commented that even the while Flipkart
managed to get consumers up to some basic levels, the Snapdeal site was unable
to meet this. As for Amazon, the social media pages were filled with more of
customer complaints rather than anyone talking of the joy of shopping. While
the reports in newspapers focussed on another online disaster caused by
Snapdeal, the Amazon offer was possibly lost even for the media. The bottom line
was clear in both cases: Snapdeal possibly lost more than gained and Amazon
failed to build on the buzz.
In my opinion, the online shopping scenario in India is
heavily dispersed across retailers who sell in specific categories and then the
big ones who have everything under one roof. In the current boom, customers are
actually spoilt for choice and thereby there are even retailers like Junglee (used
to be the Indian brand by Amazon) which have got into the mode of a search
engine for retail to give you the best deals. Sadly, it is too early for people
to have formed loyalties and majority of the population sways to the retailer where
the prices are lowest for the day. It is hardly surprising that in case of a
flash sale, the number of users multiply exponentially and the support
structures are collapsing. Also, it is not viable to maintain a backend in
terms of inventory, servers and payment gateways for the flash sale volumes for
all other days of the year.
Not to mention, physical retailers have been crying foul
towards flash sales riding on predatory pricing strategies. Since the online retailers
have no direct arrangements with the manufacturers of durables; LG, Samsung,
Videocon, Sony and Panasonic forbid their trade partners to sell their products
with deep discounts during flash sales on e-retailers, while to buyers of the
products are termed not eligible for after-sales service or warranty. I have
had one experience where my product was not even handled by an authorised
service as it was an exclusive online product.
I guess on an overall, online retailers have to introspect
into what they are offering and what they need to make this wave sustain in the
long term rather than more of flash sales and heavier discounts.
a)
Market Size:
Online retail is on a boom and is looking at exponential growth. But all put
together, it accounts for a fraction of total of physical retail sales in
India. The number of categories is today limited and growing, but it has many
miles to travel before replacing the traditional formats to a significant
degree anytime soon.
b)
Deliveries:
Last year I was proud to awe my brother with the record 2 days for a standard book
delivery by Flipkart. This year the same has been extended to 5 days. My friend
over two weeks has been fighting over apologies and no responses after a wrong
book was delivered to him. Another one reported of a delivery boy who fainted
on the road due to fatigue and overload of pending deliveries over Diwali. All
these are just signs of the lack of robustness in the delivery mechanism which
needs an urgent shot in the arm.
c)
Revenues:
Every sale so far has had huge spends on media, investment in inventory and
delivery and heavy discounts. This is driving the top line of the sales chart-
but what about the bottom line? How far can it be ignored? It is known that
everyone in this business run in debt, but is this how things will run for
ever?
In every business, there has to be a consolidation phase
before the next big step. I believe its time it was attended to as well if we
do dream to see someone to be India’s answer to Alibaba.
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