Friday 29 May 2015

Online retailers face heat as buyers wait for deeper discounts

New Delhi: Their getting-a-better-deal instincts whetted by the hefty discounts offered on e-commerce websites, customers are staying away from online sales dangling 20-40% rebates, preferring to wait for the 50-80% sales that are inevitable as online retailers chase higher market share and revenue at any cost.
E-commerce sites, and have all seen some of their sales in recent months fall short of internal targets, according to six people familiar with the matter who spoke on condition of anonymity.
Myntra ran a three-day sale at the beginning of this month and hit only 50% of its target, two of the six said. They added that the company is now running a television commercial ahead of another sale this weekend to better its prospects.
“Some sale events have done reasonably well considering the company didn’t spend a lot of marketing money, but overall, it’s been a mixed bag. Consumer response to sales hasn’t been as good as expected since the January sale,” a third person, a Myntra executive, admitted.
Amazon denied that its sales have not been working.
“At Amazon, we have always believed that customers will continue to shop with us as long as they don’t find a better shopping experience elsewhere. Our focus has therefore always been on offering our customers a wide and unique range of products at low prices and provide a fast, reliable and trusted shopping experience. Price, we believe, is just one factor,” said an Amazon India spokesperson.
But most analysts and customers agree that in general, sales on e-commerce marketplaces are no longer as impactful as they once were.
Tanmay Sharma, 26, is an avid online shopper. He has skipped most sale events in last two months. “These sales did not offer steep discounts. A 20-45% discount can be fetched any time by using cashback vouchers and additional discounts on mobile wallets and credit cards,” he explained.
“Companies are seeing no movement in GMV (gross merchandise value, or value of the products sold on the site) if they offer a 30-40% discount,” added Paras Arora, vice-president at TargetingMantra, an e-commerce personalization and targeted marketing platform. “Deep discounting always works as consumers are largely deal chasers but companies need to focus on building loyalty and not customer acquisition alone.”
That’s bad news for companies that need to keep their GMV moving to retain and increase valuations. To do that, they pump money raised from venture capital funds into discounts and marketing activities. Their ultimate goal: to build market share, remain one of the last marketplaces standing and, hopefully, translate this share into profits at the time.
Discounts will work, said Sanjiv Kathuria, co-founder and chief executive at Dotzot, an e-commerce logistics arm of DTDC Courier and Cargo Ltd, but companies have to be intelligent about them.
Other experts and executives in logistics firms are still trying to understand the reasons behind the tepid customer response.
Sumchit Anand, founder and managing director at Acquisory Consulting India Pvt. Ltd, blames it on poor consumer sentiment arising from larger concerns related to the economy.
T.A. Krishnan, co-founder and chief executive of Ecom Express, a logistics firm, claimed February and March have always been slow months for the retail trade.
Interestingly, Flipkart and Snapdeal have stayed away from aggressively promoting their sales. Flipkart is expected to run one large sale event around Diwali just like the BigBillionDay it did in 2014.
Mihir Dalal in Bengaluru contributed to this story.

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