The Big Sale: Hit or Flop?

07 Oct,2014

 

By Harsimran Julka & Aditi Shrivastava

 

Flipkart declared on Monday it had created Indian e-commerce history by clocking $100 million (Rs 600 crore) in sales in just 10 hours of its much-heralded discount sale, but not before its hard-won reputation for customer service excellence suffered knocks amid technical glitches and recriminations from angry buyers disappointed with the pricing and availability of products.

 

As India’s largest online retailer and the posterboy of its startup boom took pride in successfully seeing through what it termed as an unprecedented event, competitors took advantage of its missteps and cut prices, diverting traffic away from Flipkart on what was supposed to be its big day.

 

Backlash on Social Media

“It feels a bit like a boxing bout in which one boxer accidentally knocked himself down before the opponent even entered the ring,” said Kartik Hosanagar, professor of internet commerce at The Wharton School in the United States.

 

Flipkart’s so-called ‘The Big Billion Day’ is the first time in India that a discount sale of this magnitude has taken place. Modelled after the Black Friday shopping bonanza in the US, Flipkart said its aim is to create an online equivalent for India.

 

Sachin Bansal, the cofounder and CEO of Flipkart, said he was pleased with the outcome, admitting at the same time that there were surprises and some errors. The company said it sold goods worth $100 million (almost Rs 1 crore every minute) within 10 hours and its site recorded one billion hits. “This was unprecedented. It is an historic day for ecommerce,” the 32-year-old entrepreneur said.

 

Online sales of goods, while they are growing rapidly, are still a minuscule part of India’s retail sector. Flipkart, Snapdeal, Amazon and others account for just $5 billion in annual sales compared to the retail industry’s size of over $500 billion but projected to grow exponentially.

 

Flipkart ended up with lot of backlash on social media sites as its system continued to change prices of products during the day. A Delhi-based customer who had paid Rs 27,000 for an LCD TV listed at a pre-discount price of Rs 49,000 was declined purchase as Flipkart said that the product had gone out of stock. “Mean sites for the same product,” the customer wrote on Twitter.

 

Another customer who wanted to buy an LCD set on Flipkart saw the price change by Rs 10,000 within two hours. Customers were also peeved as Flipkart did not allow cancellations. Many shoppers who encountered better deals or changed their mind after clicking the buy button had no choice left, unlike on other days when cancellations and replacements are allowed.

 

Flipkart attributed some of the problems to the “largest scale of traffic and customer visits e-commerce has witnessed across the country”, noting that it had got a billion hits on its website. As angry customers took to social media, rivals gained traction. “Amazon was the most trending site on our site on Tuesday,” said Swati Bhargava, CEO of CashKaro, an online cashback site which directs user traffic to sites such as Flipkart, Amazon and Snapdeal.

 

“People are loving the Amazon discounts which keep on getting bigger and Monday compared to Sunday, making October 6 its biggest day ever in India. The company attributed this to deals every hour and “ensuring the availability of the deals advertised.” Amazon India’s site was redirecting to bigbillionday. com during the day.

 

Rival Snapdeal, which cocked a snook at Flipkart with an advertisement that sought to make light of its rival’s big day (“For others, it’s a big day. For us today is no different), also did not leave any stone unturned. Its co-founder and CEO Kunal Bahl said Snapdeal had also sold goods worth Rs 1 crore a minute. “The best part of the day: we didn’t really spend much to bring customers to Snapdeal,” Bahl said, in an apparent dig at Flipkart’s advertising blitz that preceded Monday’s sale that, industry watchers say, would have cost the company tens of crores of rupees.

 

Bansal admitted errors with “a few products and few customers.” These he attributed to mistakes on Sunday night while uploading prices of products and promised to rectify the problem. “it was not intentional at all. We are sorry for that,” he said, adding that the Flipkart team had burnt the midnight oil ahead of the sale. “I slept only 2-3 hours last night. Living on Red Bull.”

 

Despite the backlash, there was optimism about the future of the ecommerce sector. Experts said that the Flipkart sale and the Diwali bonanza from Amazon and Snapdeal will help change the habits of the Indian consumer used to thronging bazaars and malls during the festival season.

 

“This looks like a transformational move for ecommerce in India, a tipping point,” said Arvind Singhal, CEO of retail consultancy Technopak.

 

Source:The Economic Times

Copyright © 2014, Bennett, Coleman & Co. Ltd. All Rights Reserved

Licensed to republish

 

 

Companies accuse e-retailers like Flipkart, Snapdeal, Amazon of devaluing brands and threatening livelihoods

 

By Writankar Mukherjee & Sagar Malviya

 

As Flipkart’s discount sale ran into a storm of protests in the virtual world, the company and its ilk of online retailers found little comfort in the real world too.

 

A parade of big name consumer goods makers and brick-and-mortar retailers took aim at the e-retailer flock of Flipkart, Snapdeal and Amazon, accusing them of devaluing their brands and threatening their livelihoods, further marring a day that was billed as an important milestone in the evolution of the fledgling sector.

 

LG Electronics, the country’s largest white goods maker, issued a rare advisory on Monday in which it explicitly stated that it had not authorised any e-commerce company, bar its own online store, to sell its products in India and hence it retains the right of not extending additional services, warranties on such products as it does not vouch for their genuineness.

 

“This is to safeguard our consumers,” a company spokesperson said. Flipkart, however, sought to reassure customers that all products sold on its site were genuine.

 

Tightening the noose

“We can assure our customers buying LG, Sony or Canon products on Flipkart.com that they are genuine. Our customers will continue to enjoy the warranty and services extended to all original LG products as always,” a company spokesperson said. But officials at several consumer goods makers, many of which have also had an uneasy relationship with the lot of e-retailers, said they would henceforth tighten the noose on online discounting.

 

LG’s rival Sony said it will not allow massive online discounting of its wares because it impacts the company’s brand image and accused e-retailers of having violated business arrangements. “The online sale war of Monday was really disappointing and alarming. This is not the way we have agreed to do business as partners,” said Sony India sales head Sunil Nayyar. He said Sony televisions had borne the maximum brunt of discounting and that it had taken a toll on the company’s brand image as customers who brought the same product a day earlier at its correct market price could feel cheated and blame the brand.

 

“We have decided to handle online discounts now with an iron hand and will ensure Sony is not involved again and there is a fair play for all channels,” he said. The maximum discounts at Monday’s flash sales were for electronic products, notably items such as Apple’s iPhone, iPod and laptops, Sony’s televisions and smartphones, Canon’s cameras, lenses and printers, Samsung’s television, smartphones, refrigerators and washing machines, LG’s televisions, refrigerators, microwave ovens and smartphones, and tablets and computers of Lenovo, Asus, Dell and HP.

 

Camera maker Canon said it would henceforth ask distributors to have separate sets of products for brick-and-mortar stores and online stores. “We have just reached an agreement with Amazon and Flipkart that while they can sell offline models, they cannot discount it. We hope Monday’s sale is just one-off scenario and will not be repeated,”said Canon India Executive Vice President Alok Bharadwaj, adding that the hefty discounting of its products on online marketplaces was not endorsed by Canon and was also difficult to control.

 

“Probably, the best way to reduce disruptions like these is deeper engagements with these online marketplaces which we now plan to do.” Lenovo, which had earlier this year urged customers against buying its products from online retailers only to subsequently withdraw its advisory, said it would also have different models for its online and offline sales channels. Lenovo India MD Amar Babu said his company was keen to have fair competition in the marketplace and did not favour one sales channel growing at the expense of another.

 

The tongue -lashing from the consumer goods biggies on Monday followed a huge brouhaha created by traditional retailers, upset that the hefty discounting by online sites would hurt their business. Brick-and-mortar stores remain the mainstay sales channel for consumer goods brands, but fear that their businesses are threatened by the fast march of online retailers. In categories such as smartphones, online retailers now account for more than a 10% market share, so much so that some new model launches now happen exclusively on these sites. Online retailers also account for 5% of television sales.

 

As Flipkart’s discount sale and Snapdeal’s riposte captured shoppers’ imagination on Monday, small retailers and trader lobbies said they wanted the government to intervene.

 

The All India Mobile Retailers’ Association, a new body that claims to represent the interest of around10,000 mobile retailers, said it would approach the government and the Competition Commission of India (CCI) to stop such predatory pricing deals by e-commerce marketplaces.

 

“The way e-commerce is progressing, several shops may have to shut down, which will jeopardise lakhs of jobs,” said the organisation’s secretary general Dhiraj Malik. He accused e-commerce firms of cartel-like behaviour, discounting products and selling them below cost prices. “This in turn has impacted our sales by 30% and profitability by 60%,” he said.

 

The Confederation of All India Traders, an umbrella body representing some six crore traders and small retailers, has already written to Commerce Minister Nirmala Sitharaman to stop discounting by online marketplaces. It said discounting by these sites had affected store sales of items such as cosmetics, footwear, apparel, jewellery, watches, electronics, computer hardware and software, mobiles, sports goods, travel luggage and books.

 

“Since e-commerce firms merely provide a technology platform for sellers who are registered with them and because the ownership of the inventory is not their’s, how can these marketplaces offer discounts?” asked its secretary general Praveen Khandelwal. He said his association would complain to the competition watchdog this week.

 

Officials at large retail chains, also taken aback at the aggressive discounting offered by online players, said e-retailers not only antagonised brands by selling products at throwaway prices but also affected distributors who might now demand unreasonable margins.

 

“This event will perhaps now trigger many brands to go against all online channels for spoiling their imagery and pricing strategy,” said the owner of a leading electronics store chain. Vijay Sales managing director Nilesh Gupta said when it comes to appliances and durables, consumers still want the touch and feel factor, especially in smaller cities.”Also, most of the popular products are not sold online and consumers will have to visit stores if they want latest collection,” he said.

 

Source:The Economic Times

Copyright © 2014, Bennett, Coleman & Co. Ltd. All Rights Reserved

Licensed to republish

 

 

 

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