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E-retail
Multi-channel retail a challenge |
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Changing the way India shops By Sanjeev Sharma An ASSOCHAM survey reveals that the online shopping market in India is estimated at a whopping Rs 92,000 crore and is growing every year by 100 per cent. The recent Amazon announcement to invest $2 billion in India and the largest-ever sale by Flipkart is reflective of the trend. While consumers may benefit, the impact is for malls and brick-and-mortar retail outlets to bear.
The excitement around Flipkart’s Big Billion Day Sale on October 6 which recorded huge traffic and sales turned into disappointment for the company when its founders Sachin and Binny Bansal had to apologise to customers. "We did not live up to the promises we made and for that we are really and truly sorry. And though we saw unprecedented interest in our products and traffic like never before, we also realised that we were not adequately prepared for the sheer scale of the event. We didn’t source enough products and deals in advance to cater to your requirements. To add to this, the load on our server led to intermittent outages, further impacting your shopping experience on our site," they said in a mail to customers.
The founders who are in their 30s grew up in Chandigarh and studied at the IIT, Delhi. Like other technology majors, Flipkart is based out of Bengaluru. The Flipkart founders wrote that holding India’s largest-ever sale on October 6 is no coincidence — ‘-10’ was the number of the flat they started out. The fiasco has hurt the company’s image, say analysts. N Chandramouli, CEO, TRA, publishers of the Brand Trust Report, says, "The fiasco has made Flipkart very vulnerable in terms of customer trust. The biggest challenge for any online medium is that unlike brick-and-mortar outlets, its transaction lacks a tactile experience. Intrinsically the affinity to any online store is only due to trust held in its technology, assured delivery, and the ability to keep the transaction secure. With Flipkart’s much-publicised online sale, its consumers’ ‘capacity to trust’ has definitely reduced in even the most ardent fans." The other competitors, Snapdeal and Amazon countered the big sale with launching mega sales of their own. After the sale, Flipkart announced it had created e-commerce history in India, getting a billion hits on October 6. It crossed the sales target of $100 million for the day in just 10 hours. Flipkart has sales of $3 billion while Snapdeal and Amazon crossed $1 billion. Offline retailers fight back
The other concern is that big brands are protesting the predatory pricing on online shopping sites as it reduces their pricing power and erodes the brand salience. Manufacturers like LG, Samsung and Sony have reportedly issued an advisory that sales on online sites of their products are unauthorised. The government got into the act with Commerce and Industry Minister Nirmala Sitharaman saying the complaints of predatory pricing by Flipkart will be looked into. Traders’ body, CAIT, has also lodged protests.
On the other hand, several brands are tying up with online platforms to use their reach and also save on marketing, advertising and distribution costs. Flipkart has tied up with PC Jewellers, Huawei, Moto G, Xiaomi, Federation of Indian Micro and Small and Medium Enterprises (FISME), DC Handlooms and Textiles Ministry among others to boost weavers. In July, the inflection point for online shopping came when Flipkart announced it had raised $1 billion in one of the largest funding rounds for any e-commerce company globally — and the single-largest round by an Internet company from India. This round of funding put Flipkart’s valuation at a jaw dropping $7 billion. Flipkart has also acquired fashion platform Myntra. Flipkart has close to 22 million registered users and handles 5 million shipments a month. "India has 243 million Internet users. We want to enable every Indian to either shop or sell online. By 2020, India will have more than half-a-billion mobile Internet users," they say. Amazon warrior
In the past over 16 months of operations, Amazon.in has helped sellers of all sizes to sell online and currently the vast majority of its 11,500 plus sellers are SMEs. Agarwal says the strategy for Amazon.in is the same as the global vision to be India’s most customer-centric company by giving customers more of what they want — low prices, vast selection, fast and reliable delivery, and a trusted and convenient experience and provide sellers a world-class e-commerce platform. The growth is at an inflection point. With increasing Internet penetration, both broadband and smartphones, there is an interest and demand from mini metros and smaller towns across the country. Amazon’s selection across hundreds of categories is now in excess of 18 million products. It has the largest selection across books, music, video games, toys, home and kitchen, sports, fitness and outdoors, luggage and backpacks, fashion jewellery, beauty products, men’s innerwear and pet supplies. There is a big wave emerging in m-commerce with 40 per cent of Amazon’s traffic coming from mobile devices. More than 45 per cent of orders on Amazon.in are coming from outside of the top eight metros. On September 21, Amazon.in kicked off the 30-day online shopping "Dhamaka", ahead of the festival season. Since then, it has witnessed a week-on-week increase of over 150 per cent in customers. An e-commerce survey by India’s largest Cashback and Coupons site, Cashkaro.com, showed that 30 per cent respondents said ‘price’ was the most important criteria when they shop online, followed by ‘quality’ with 29 per cent. Electronics rule again in categories, with 23%, and fashion and apparel a close second with 21 per cent.
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Multi-channel retail a challenge
“The rise of omni-channel is one of the most transformational shifts that has occurred in retail in recent times,” says Baljit Dail, chairman of the board and interim CEO, JDA Software. “Retailers who don’t understand the strategic alignment of their supply chain with consumer expectations are in danger of becoming non-competitive. There are several reasons why consumers prefer online retail. According to an Assocham survey online retail industry’s business is quite good. Heading out to shop on a day off in scorching heat, battling traffic, parking issues, and long lines for bill payment is a cumbersome process. This is the main reason for the shift.” As per the majority of respondents, the business module is cost effective, easily accessible and profitable in many functional areas. Consumers and retailers both desire safe, simple and comprehensive online shopping that will realise the range of power of the Internet,” adds the ASSOCHAM survey. With such a large market size, companies, right from retail shops to consumer goods, are entering the Web space to attract potential customers, it adds. The online shopping industry in India is fast catching on, not just in the larger metros but also in the smaller cities. As per the survey, a majority of respondents are working and shopping at the same time between 12 noon and 4 pm on a working day. More than half the sales of web-stores come on Tuesdays, Wednesdays and Thursdays and dips on weekends, when buyers head to malls instead. Weekdays are busy for shopping online, while weekend traffic drops by 10-12 per cent, particularly on long weekends. Most e-commerce companies are targeting 40 per cent revenue from mobile sales in 2015. Among the above age segments, 18-25 years of age group is the fastest growing segment online. Kavya Arora, CEO, Femella, an online women’s wear brand, says, “Our focus is to give fashion and quality at the best price to our customers. We focus on latest trends and curate our collections accordingly. We have done backwards integration from running brick-and-mortar stores to reinventing the business model by going online. Investment in opening more stores is higher in comparison to the sales a brand is able to generate through it. Operations, rentals and running the stores which includes maintenance, salary, and other fixed costs can make it difficult for a price conscious brand to grow.” Swati Bhargava, co-founder, CashKaro.com, says, “The e-commerce market is growing aggressively and is expected to reach $24 billion next year, a four-fold increase since 2011. With Flipkart snapping up a whopping $1 billion in funding and Amazon announcing its presence, it’s exciting news for shoppers. An even more interesting market is taking shape: coupons and cashbacks. We drive sales to over 500 e-commerce sites, including Myntra, Jabong, Amazon and Snapdeal.” Online sales is spreading to realty also with Tata Value Homes tying up with Snapdeal. Manish Agarwal, managing director, Satya Group and secretary, CREDAI NCR, says, “We see it as a new beginning, an alternative medium and a sign of maturing of the real estate market. While it offers many positives such as saving of cost and time, both industry and customers should be vigilant about stray elements. It will take some time to ascertain effectiveness but the real estate sector has got a new channel to sell its products.” Home bookings through non-real estate e-commerce portals is a new trend, yet if you are dealing with a combination of leading e-commerce portal and a trusted brand, you know that your bookings are safe. “Presently, we are using popular real estate websites to sell our inventory. About 10-20 per cent of our inventory is sold through online referrals. We are also doing our home work to tie up with non-real estate portals such as Flipkart and Snapdeal,” he says. ‘Cosmetics to air tickets’ Customer behaviour is changing dramatically. People are not only using the Web to book air tickets and movie tickets, but also do not hesitate in placing orders for apparel, cosmetics, mobiles, laptops and other electronics and home appliances. — DS Rawat, assocham secretary general
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Every
"An
unprecedented 1.5 million people shopped at Flipkart yesterday. While we
stand humbled by the sheer faith that such a large number of customers
have shown in us, we are unhappy that we were unable to live up to the
expectations of millions more who wanted to buy from us yesterday. And
this is not acceptable to us. We have worked very hard over the last
seven years to earn your trust. Yesterday, we failed that trust,"
they added.
One
of India’s largest brick-and-mortar retailers, Future Group with
chains like Big Bazaar says consumers trust cannot be replaced by sales
and offers. There are concerns that online shopping volumes will hit
brick-and-mortar retailers with traffic shifting online due to the
discounts offered, ease of shopping and traffic hassles in metros.
Assocham,
meanwhile, has warned of over regulation. "The Flipkart incident
resulting in inconvenience to enthusiastic customers on the Diwali offer
should be taken at the most as one-off case and let it not be used as a
ploy or an ammunition to subject the fledgling and a hugely promising
e-commerce space to regulation over and above the rules of the game
which are applicable to normal business," it stated.
Amazon
has also announced investments of $2 billion for India. Its global CEO,
Jeff Bezos, was in India recently and said Indian SMEs should "lean
into the future and get hooked to the digital platform" so as to
reach a global audience. Amazon.in is also exploring possibilities to
help take Indian SMEs global. Amit Agarwal, vice-president and country
manager, Amazon India, says in July 2014, Amazon.com announced
additional investments to the tune of $2 billion into Amazon India.
A
global retail CEO survey of over 400 retail industry CEOs, conducted by PwC for JDA Software, says as mobile commerce comes of age, one of the biggest challenges facing CEOs is managing the transformation to omni-channel retail. However, only 34 per cent CEOs consider the rise of omni-channel shopping to be an external threat, while 22 per cent said it will have a direct impact on their organisation.
Assocham secretary general DS Rawat says, “Customer behaviour is changing dramatically. People are not only using the Web to book air tickets and movie tickets, but also do not hesitate in placing orders for apparel, cosmetics, mobiles, laptops and other electronics and home appliances,” the survey states. “Traffic, fuel prices and time management have made going to a mall a planned activity,” says Rawat. India’s e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and $16 billion in 2013. It is expected to touch a whopping $56 billion by 2023, which will be 6.5 per cent of the total retail market.