Changing the way India shops

 EVERY business, much like an individual’s lifetime, has a moment when it reaches an inflection point. It seems that for the online shopping industry that moment may have arrived. When does a business or industry go mainstream from niche? Online sites like Quikr are putting up ads in apartments asking people to sell their old stuff online. Festival shopping in the Navratri and Diwali season is being used by sites like Flipkart, Amazon, Snapdeal and others with bonanza offers and discounts. Many brands are tying up with online shopping platforms to market and sell their products. Last week was a roller coaster for the online shopping story.

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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.

"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.

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

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.

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.

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.

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.