Online retail in India- Still a long way to the top

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 11^th 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. 

India- Where even small means BIG!!!

If the market is the prime point to start off while thinking of marketing, India is the land of opportunity. Statistical explanations are most often used by research agencies and consulting firms as a support to show how a small sample survey can be extrapolated and a maximum population under a desired market can be segment, targeted and possibly milked. One of the considerations that most agencies will offer is to concentrate under the bell and ignore the extremes at both the ends.

Somehow this isn’t always true when it comes to India. If I was to paraphrase a very senior and knowledgeable person on India, Mark Tully (BBC Bureau Chief in India for 30 years prior to 1994), with the kind of population India boasts of, even a section termed as the exception can actually number into millions. If put into marketing perspective, even a failure like the World Space Radio had 4.5 lac subscribers in India (the only country to deliver profits) and a cult bike like Royal Enfield hugely affects the stock values of Eicher Motors. It is hardly surprising then that Flipkart can make sales worth Rs. 6 Billion (USD 100Mn) through just on Big Billion Day.

While the above might suggest that there is almost a constant momentum by the side of any product or service which can fulfil the market needs in terms of the price & quality equation. There is possibly no company which enjoys the satisfaction of the ‘S curve’ and the fascination of adding more customers and greater revenue keep the journey within the ‘J’ curve for growth. It is at times that this fascination increases the areas of neglect which are most likely to hamper the desired levels of growth in the near and present future. A case in point, Enfield bikes have a waiting period of roughly 4 to 14 months depending on the model and the consumer choices.

Maybe a cult bike can afford a bit of snobbery; but can an e-retailer in a market driven by cut throat competition afford such lapses?

Flipkart’s Big Billion Day was the first of its kind initiative in India and it almost earned itself the title ‘Flopkart’ thanks to all the technical glitches. The saving grace was for the founders to express an apology to the customers it could not handle on that day. (http://www.dnaindia.com/money/report-flipkart-turns-into-flopkart-on-big-billion-day-sale-2024058 )

We can draw parallels to the fact that the first Republic Day Sale by Big Bazaar (another first of its kind in India) also had caused similar ciaos and almost rioting by customers outside the stores; a situation managed by riot police and a declaration of extension for the sale.

Both these are cases where consumer response to the discount sale was far exceeding expectations and the retailers were not planned for the scenarios. But the consumer today is a very different animal. They are high on options and low on patience- which practically implies that they are demanding on their terms and unforgiving towards any slip ups.

With one Big Billion Day Sale, Flipkart has 1.5 Mn orders to fulfil. This is in addition to its everyday sales where it trades its numbers with SnapDeal and Amazon for the top spot. All have been offering heavy discounts leading up to the festive season leading up to Diwali and have together contributed to a problem faced never before by the e-retail model: a breaking strain on the delivery logistics. All the giants use some or the other kind of a courier company as its last mile link and the sheer volume of orders is exposing its weakness.

For the first time, it took 5 days to get me a book I ordered from a seller in my own city of Mumbai. The next was a comparative delay on some electronics which was again 5 days from the date of ordering. The previous benchmark was 2^nd day for a book and 3 days for electronics of similar kind I had ordered previously. While I kept my anxiety aside by convincing myself on how not being a loyalty club member can affect service, an article I read today actually told me that so was not the case; nor was I the only one who is having such experiences. (http://www.dnaindia.com/money/report-e-tailer-shipments-pile-up-on-diwali-rush-2028506)

These are not isolated incidents, nor is this a problem just the Flipkart’s and SnapDeals of the world facing; to me it appears as a critical area called ‘delivery’ has been outsourced and ultimately overlooked. The consequences are evident- cancelled orders, further loss of face for the brands and a bad customer experience to top it. Not to mention, large electronic brands like Sony, Canon and Dell are refusing service under warranty for products bought online as they refuse to acknowledge the genuine-ness of the products. I have already have had one such warranty refusal, but luckily the matters have not escalated beyond.

As a marketer, we are often laid a challenge to think of areas where something named ‘competitive advantage’ can be identified and used to the fullest to surge ahead. Service delivery and aftersales is one area where we often searched for such an opportunity with high impact and difficult replication. 

As I see, the retailers of today have possibly missed the bus and having not planned this as a place to build their brands. It might have been a small area and might be affection a small percentage of the orders. But then again- for India, the small can actually be BIG! While the high volume advertising has made 'Let's Flipkart it' as a new addition to the next edition of Slang dictionary, they seem to have failed at winning customers by building on what can actually be the big advantage. 

In-Film Blasphemy

Possibly a strong word for what I intend to write about; but its impact at times when used inappropriately destroys the sanctity of an art form and also is an abuse to a viewer. Sure there is enough logic for film makers and marketing fraternity to bind and place products in a movie- the problem is I’m seeing instances of in-film placements being done on a level which is so ridiculous that it actually spoils the movie experience.

In-Film placement (or branding) is something I had no clue of when I was asked about it during my application stage for a media school. In fact, what I wrote was utter crap and am actually confused how I managed to get through. But the grooming has now reached a level where I can know why Superman crashed into a giant Coca- Cola signage and why Bond drove into a van with Perrier water bottles. It also justifies why BMW, Aston Martin, Sony and other brands have so much invested in a Bond franchise. I would have still known a Mini Cooper from The Italian Job (Michael Caine or Mark Wahlberg), but I got introduced to Remington Vaults from it. My point is it is subtle and doesn’t seem like it is not a part of the storyline.

The scene in India has been a bit different though. Loads of films through the 60’s to 80’s have mentions of Mobil Oil, Chevrolets, Coca-Cola, Polson butter; but I guess I identify them since I have an open eye for it. Possibly Rajdoot motorcycles is the best example of intentional use of products in films. Bobby (1973) lent the motorcycle used the same as its name. In Hero (1983), Rajdoot has a complete product placement through 5 bikes- along with a song shot on the bikes and musical show with Escorts brand logo placed on the backdrop. Interestingly, the producer- director of Hero, Subhash Ghai had a song sequence with a fleet of Maruti 800’s in Meri Jung (1985) and Coca-Cola in Taal (1999). But none of these were overt displays of a product or brand, so much so that Bambai se gayee Poona and its association with East West Airlines is virtually unknown.

In recent times, in-film placement has become a significant part of a film marketing aspect. While working with Percept, my agency was coordinating with Godrej Security Sytems on Tasveer 8 x10. I got to learn a bit more of what is in-film and out of film associations. Honestly, I have no issues with out of film as it has no impact on my movie viewing pleasure. But I have a problem with brands that are force fit into the script.

So while the marketing fraternity was up in arms when Krissh offered his friend Bonvita or SRK travelling on Chennai Express told me what the latest Nokia handset could do (and the price as well), I was actually not impressed. BigB asked cops to chase Bunty aur Bubbli in an Orange Maruti Swift and Mariti Ertiga was the subject of Mere Dad ki Maruti… yawn! But surprises were when Munni badnam or Fevicol se did not have a large hoarding of Zandu or Fevicol in the background. Disappointments were though when Chulbul Pandey in Dabangg 2 used an Astral pipe to fight the bad guys and assured his father of financial security for the family by subscribing to LIC Insurance policies.  Comparatively when Ultratech Cement donned the Indian jersey in Chak De India, it was not a sore sight as it was actually the sponsor for hockey. The recent list on this front is actually endless.

The latest uproar is about Mary Kom- and rightly so as the brand placements are so very ‘in your face’ that it becomes a turn off. So like any Indian, she is cooking in her kitchen; why the specil focus on Tata Salt. Why is PC caught saying, ‘Hum ne desh ka namak khaya hai’, relieving muscle pain with a particular brand or switching to sugar substitutes when confirms pregnancy?? I have no objection against Monnet Steel for the branding on the jersey; but rest all is staged so bad that it is actually repulsive.

This is not limited to Hindi alone: a Marathi remake of Seven brides for seven brothers (coz Satte pe satta is a remake of this one) had a Tata Ace (Chota Haathi), Red Label Maharashtra mix (for the hardworking Marathi) and a masala brand being hammered all throughout. Recently, Poshter Boyz had a scene especially written for Birla Wall Putty highlighting its benefits, quality and other features compared to the rest as a blatant 2 minute ad.

What is the reason marketing and film fraternity causing such blasphemy and abusing a national source of entertainment? It is actually a sad state of affairs as in-film marketing agencies see theatre audience as a captive and a cheaper option to television ads. Brand owners, I guess, are demanding prime presence in shots and mentions of the brand in the script in some way. Sadly, film makers also see this as a good source of revenue to support the production costs and turn overs and are giving a fair amount of leeway to the advertisers in such cases. The overall impact- as a viewer, the brand communication is intruding into my entertainment space and actually getting a bit of a repulsive response for spoiling the texture of the movie.

I am actually interested in some hard core numbers to quantify the impact of such communication. Honestly, I have a feeling this is being run purely on mutual benefit theory rather than anything. Brands are lured assuring audience and cheaper media; film makers are actually abusing their creation through blatant and ‘in your face’ ads in movies by bending down to financial temptations. Overall, I don’t see a benefit- all I see is blasphemy. 

How do brands die

I have often mentioned that being born in the 80’s and living through the years after has offer me and my generation an un-paralleled advantage- We have seen the world change in bits and pieces, day-by-day. Technology from my childhood is obsolete in most cases today; the one still around only have classical value. What the changes have also resulted in has been the fall of dominant empires and rise of new ones which replaced them. Some like Sony who changed with times still hold their stature. I don’t think people rate the technology of a Bravia, Vaio or Xperia lower to the Walkman at some point in the 80s. Sadly, the ones which got lost in their own glory to forget the art of adaptation went on to immortalize Darwin.

One of the most appealing and fascinating gadget my father had was an SLR camera from Minolta as well as a point-n-shoot Nikon. But what had to be treated with immense respect irrespective of the make was the camera film. So it didn’t matter if Sakura was now Konica, Fuji was cheap or Kodak was expensive- if by chance the film from any one got exposed accidentally opening the reel cover, down the drain went the memories. The films also demanded respect as you could click only 36 shots per reel (yes, there were some shady ways to do more on the same reel), so taking a picture was like a responsibility.

I took some time to read up on Kodak for making a case study and realised that Eastman Kodak was the oldest and the biggest player in the camera film plate arena for close to 100 years when I might have held a camera. It was a legend that had over 90% market share at one point thanks to its smart selling strategy of cheap camera units and milking the film and photo paper cows. Along with Gillette and its shaving blades, this was another great example of making the big profits on the consumables- something still followed by a lot in the market.

After the patent for the film plate was taken, a folding Kodak pocket camera in 1890, which was pegged at a very affordable price of $25. The main stay was the $10 to process and print the pictures which in combination with the camera paved the road to greatness. I’m not sure when BTL marketing was officially recognised, but in 1897, Kodak sponsored an amateur photographer contest and saw 25,000 participants. In 1904, Kodak held a Grand Kodak Exhibition featuring 41 photographs to attract an audience for the art. This connect is so natural that I cannot imagine if this marketing proposition might change for such events today.

The ads were so powerful to take the photography to people other than professionals - “You press the button- we do the rest”. Not to mention, signage’s along the roads reading, ‘Picture ahead’ with the well-recognised Kodak name under the sign is fabulous use of ambient media. The term "Kodak moment" might be used for eternity for every memorable picture. This was the strong brand connect that Kodak has in the memory of every individual. Sadly, I feel it won’t be wrong to say that no one uses Kodak in taking pictures any more.

The demise of the brand to the levels of bankruptcy in 2012 has been a classic case of treating it as a product offering and forgetting that the brand was a living being with a personality. Much like a human being, it has to adapt to changes and transform its role in the life of people to maintain its relevance. Yes, handling competition was important- so was transition into technology that could change the business dynamics. Kodak had developed a digital camera in 1975, the first of its kind. But the product was dropped for fear it would threaten Kodak's photographic film business, which was already facing threat from Fuji by means of its competitive pricing.

Marketing Myopia, as my marketing professor preached was like being so much in love with your products that you become completely ignorant of what damage this obsession leads to your own self.  The outlook from the management always remained that profit for Kodak was in making money on the consumables side as the optics was just a one-time buy. Digital imaging transformed this myth and when Camera phones came out, Kodak went into the business of vendor driven memory chip business.

Kodak had a fabulous connect with people and their memories. They had done everything right from the very beginning to reach a stature no one else can possibly manage. All they needed to do was possibly maintain that connect irrespective of selling films to feed their camera. If the phone got a decent camera, the logical move was to bring out a super camera that could also be a phone. Photograph= Kodak; that was the least or most they has to ensure. Sadly, they missed the bus and ran out of business.

What all this only signifies is that brands are like living beings interacting with their users. People wish to be associated with a brand for a part of its persona that builds these bonds. If the threads of this bond are not recognised and the relation turns into a transaction; you might just be the next Kodak.