Direct-selling market – some embrace ecommerce, but some still stay away

The growing popularity of online marketplaces is not only hampering traditional retail sales but also the direct-selling industry. Direct-selling companies that include Tupperware, Amway, Eureka Forbes, Oriflame, and HUL’s Aviance & Ayush believe that ecommerce is disrupting their business model.

Distributors selling through online marketplaces

A conventional direct-selling business model meant distributors/agents selling products directly to customers and also converting these customers into selling agents. This way a chain or network of distribution was created.

Although, it has been noticed that these days the distributors are selling through ecommerce portals like Snapdeal, Flipkart and Amazon. Needless to say the direct-sales business model is getting disturbed.

Some refuse to switch to online business model

Amway and Tupperware are two such companies who have refused to embrace the ecommerce trend and let go of the traditional direct selling method.

Marketing Director at Tupperware, Chandan Dang feels that online sellers are diluting the hard work put up by its distributors and sales force.

He said, “We have written to online retailers explaining the above. Unfortunately, many continue their activities. However, in some cases where they have committed a brand or logo infringement, we have been able to get them to withdraw.”

On the other hand, an Amway spokesperson wants to warn buyers,

“People purchasing Amway products from these channels run the risk of receiving products that could be, among other things, out of date, spoiled, altered or even an imitation.”

While some have wisely made the online transition

HUL and Eureka Forbes are the ones who have accepted that online selling is the way to go if they wish to stay current.

Marzin Shroff, CEO of Eureka Forbes puts it astutely, “You cannot stop technology and with consumers going online to buy products, we have launched models specifically for such sites to avoid price wars. At the end of the day, it is a free marketplace and we have to go where the consumers are going.”

HUL that changed its direct selling operations of beauty products to online ordering model early this year also believes,

“In view of the options available in the current market and consumer context, we have strategically decided to leverage the strong equity of the network brands to make them available to a wider set of consumers through e-commerce portals.”

Pleasant or not, convenient or not, the only thing constant in life is change. Ecommerce is the ‘present’ and if companies want to be successful then it is sensible to adopt the changes and infuse it in their business model. Even big retail brands are switching to omni-channel strategy. It’s time direct-selling companies too officially enter the online space.

Mobile wallet payments to rule the ecommerce world

Mobile wallets are soon becoming the preferred mode of payment for online transactions. The last year has been all about shopping on websites versus mobile apps. However, this year it will not be about shopping, but about how to pay for the purchases. Mobile wallets still remain largely untapped in India. This trend is shifting gears, according to industry analysts.

Everybody gets a share in the pie

It is a win-win situation for all players. The industry is said to be valued at roughly Rs. 1.2 lakh crores, and has the potential to be the next big thing in Indian ecommerce. With smartphone usage picking up pace, introducing and encouraging the use of mobile wallets for payments will not be a herculean task for the service providers. Reports maintain that smartphones are more in number than bank accounts. This shows that promoting the use of mobile wallets will be a lot easier than encouraging users to get a bank account; thereby a credit or debit card.

The industry leaders

PayTM, MobiKwik, mRupee, Citrus, and Airtel Money are the leading players in the mobile wallet sphere. As the concept is still new, these companies will have to work on creating a niche for themselves. They will have to work on establishing and popularising the concept among buyers. Offers and trial packs will go a long way in creating an impression among buyers. It is also important for mobile wallet companies to retain their customers. One time usage and trials need to translate to long term relationships for the concept to take hold.

Mobile wallet companies also need to establish a solid alliance with other players like marketplaces and sellers. The winds of change are blowing, and the market seems to be set to welcome technology that makes online transactions simpler.

What’s up with Jabong –turning profitable or being sold?

When it comes to fashion etailers, Jabong and Myntra were the two names that were featured regularly. Although at present, Myntra along with Amazon Fashiontake the maximum space in the online fashion world. Whereas, Jabong has left us wondering where does it stand now?

Things were looking up after integrating with GFG

In April 2015, Jabong was integrated into the Global Fashion Group (GFG), which is formed with five Kinnevik and Rocket-Internet backed online fashion startups operating in various emerging markets such as Russia, America, Middle-East, and Australia. Soon after the deal, the fashion etailer appeared to be positive about achieving profitability.

Jabong owners GFG in talks with Paytm & Snapdeal

However, by September end, the news about GFG looking to sell Jabong came out. Few reports suggested that Jabong’s owners are in talks with Snapdeal and few others hinted at a possible deal with Paytm.

It was believed that Jabong is losing its market and hence the owners feel it is best to sell it to one of the established online marketplaces akin to Flipkart-Myntra collaboration.

Then comes the declaration – ‘Jabong will be among the first Indian e-commerce firms to turn profitable’

Looks like, it was too soon to write-off Jabong. Nils Chrestin, CFO at Global Fashion Group (GFG) and interim Chief Executive at Jabong has confidently declared, “Jabong will be among the first Indian e-commerce firms to turn profitable.”

He also dismissed all the reports about selling Jabong by saying, “In general, there is lot of speculation in the market. The truth is that we are finalizing the transition to a new management team and we have sufficient capital available from GFG for Jabong to grow its business.”

What changed?

Chrestin agreed that Jabong went through a transition period, primarily triggered by the change in management and founder members resigning. This resulted in drop in sales and the pressure on the fashion etailer to cut down losses kept mounting. But, he is positive that by Diwali, Jabong will regain its lost market position.

Speaking about the same with Livemint, Chrestin said, “We went through a transition period and it is coming to an end now and this Diwali, we will shine a new light on Jabong. It will be a prosperous period post this Diwali with a new management team and fresh capital. We have a multi-year view. We are not trying to maximize some short-term valuations by throwing about GMV numbers for an exit.”

Another major strategic change that the company has implemented is focusing on building a sustainable and profitable business rather than GMV. Chrestin is of an opinion that ‘GMV is complete nonsense’ and added,

“It (GMV) is not a number anybody would focus on if you want to build a sustainable and profitable business. If you want to get a real sense on how they (ecommerce companies) are doing, ask them to give you the real revenue and not the GMV. If I were to focus in GMV, I could double my business immediately.”

We like the fresh, renewed energy around the new Jabong. Will the strategic changes work? We’ll know that when Diwali comes. Until then, let’s hope that Jabong comes back with a bang.

Offline shops may be open 24×7, time for etailers to find new strategy?

With an aim to create a level-playing field for brick-and-mortar retail outlets and online retail, the government is planning to introduce a new law.

As per this ET news report, this proposed new law once implemented would allow malls, restaurants, theatres and local stores to remain open throughout the night. An official from the Labour Ministry confirmed the news and said, “We have begun discussions…The first draft of the new law is likely to be finalised in a month.”

Great news for the Indian Retail Industry

The online retail industry still accounts for a small percentage (less than 1%) when compared to offline traditional retail. But, with millions of money pumped in online marketplaces like Flipkart, Snapdeal, Amazon, Myntra and Jabong, the online retail industry is growing at a jet speed.

This poses a huge problem for traditional retail. One of the major hindrances that retail stores face is the time restriction to shut down shops. This makes it difficult for them to compete with etailers, as it is available 24/7.

With this new law, traditional retailers will get an opportunity to compete with its online competitors and earn more revenue. It will be much easier to do business and expand.

Industry watchers happy with modernizing retail

Our economy has changed so has the lifestyle of Indian citizens where shutting down shops early means a golden opportunity lost. This is why retail experts believe that scraping the old law and drafting a modern one was long overdue.

BP Panty advisor to the FICCI said, “The retailers want to run shops 24×7 and this kind of flexibility will help them get more business. Besides, consumers, especially working couples, will get increased access to shopping even at night.

Kumar Rajgopalan, CEO of the Retailers Association of India also expressed his delight by stating, “A central guiding law with no mandate on timing will be of immense use to retailers and would help create more employment besides addressing the needs of consumers.”

But labour laws should be kept in mind

Introducing a law, which will let brick-and-mortar outlets to run round the clock, shouldn’t lead to exploitation of labour. Attention must be given that organizations keep the working hours realistic and start different work-shifts so that employees are not oppressed.

It will be interesting to see how online retailers react to this new law. Will they have to draw a new game plan to compete with traditional retail? Share your views.

Online marketplaces triple their GMV; sellers finding the same success?

The increasing number of people looking to purchase products online is likely to result in the combined Gross Merchandise Value of Indian ecommerce companiesto cross $12 billion by the end of the year, in comparison to last years GMV figure of $4.5 billion. Google further predicts that by the end of 2016 the GMV will jump to between $18-20 billion.

• The Indian online shopper base in 2014 was approximately 40 million
• The Indian online shopper base this year is expected to touch 60 million

“The overall ecosystem is growing. The good part is that many small guys are also growing rapidly with an increase in their shopper base and GMV. Even a niche e-commerce firm in furniture or baby goods is growing three to four times a year,” said Nitin Bawankule, head of e-commerce at Google India.

Marketplace Marvels

No conversation on Gross Merchandise Value in India can be complete without mentioning Amazon, Flipkart and Snapdeal who control nearly 80 percent of the market. Their continued investment has enlarged the ecommerce pie. Half a million small firms from small towns are registered with Amazon, Flipkart andSnapdeal, which is allowing them to sell across the country with ease.

Amazon

• Has tripled the number of sellers on its platform this year
• Grew by four times this year, compared to last year
• Has been adding on average 40,000 products a day on its platform
• 90% of its sellers are using logistics and warehouse services
• Invested 1,237 crore into Amazon sellers service just last month

“We are encouraged with what we are seeing, both in terms of customers and sellers. On the customer side, active customer accounts have risen 230 per cent over a year ago. We are in the middle of the Diwali season, which is going well. Sales this season have been four times as much as the year-ago period,”remarked Brian T Olsavsky, chief financial officer, Amazon.

Snapdeal

• Has managed to cut its delivery time down to four hours in some cities
• Its consumer base has grown three fold this year
• Five million products were sold in three days during the Diwali sales
• Is targeting a $10 billion GMV by March 2016
• Registered a 10 times growth in electronics during Diwali sales

“Every year, Diwali traffic goes up by a few hundred thousands. What is surprising is that the traffic does not go back to the previous rate in the week after Diwali. And, the new figure becomes the base for the next year,”saidAnand Chandrasekaran, chief product officer, Snapdeal.

Flipkart

• During the 5 day Big Billion days sale, sold $300 million worth of goods
• $200 million came from selling mobile phones
• Last year it sold $60 million worth of mobile phones at the Big Billion day sale
• The marketplace has more than 42,000 sellers
• Around 500 sellers on Flipkart posted sales of over 10 lakhs during the Big Billion days sale

“Compared to last year, we have seen much better numbers for growth and transactions this year,” informed Saurabh Chandra, head off apps, Flipkart.

Ebay resurgences

According to a report by the Boston Consulting Group and Retailers association in February, the ecommerce market will be worth $60-70 billion in 2019, compared to the $17 billion in 2014. This is causing companies like ebay who lost out in some key global geographies, to rethink their India strategy.

“There is a plenty of hype, but there is also a good deal of reality in India. It is a growing market, it is exciting, and there will be multiple winners. We will be one of them,” said Scott Schenkel, chief financial officer & senior vice-president, ebay.

It is estimated that nearly 40% of India’s retail consumption takes place during the festival period of September to December. With the number of smart phones increasing day by day, it may turn out that the GMV predictions for this year could be higher than previously thought.

As an online seller are you finding 2015 to be more prosperous than last year, in terms of Gross Merchandise Value? We would like to hear from you!

Firecrackers dotting the virtual sky with online sales

Everything is going online today, including firecrackers. The trend of selling firecrackers online is slowly picking up in India. Leading online grocery storeBigBasket is selling close to 44 firework products in its website. Sellers in the fireworks hub of Sivakasi (Tamil Nadu, which is the traditional fireworks stronghold) say that legal and other hurdles are affecting the sales.

Stiff competition from cheaper Chinese variants

Retail sellers are hesitating to buy crackers due to stringent license laws. This leaves the manufacturers in the lurch. There is also the problem of cheap Chinese crackers that are flooding the market. All put together, many manufacturers are slowly turning to the online medium to sell their fireworks.

“There are a lot of problems with traditional retailers now. There are very stringent conditions they have to deal with and very short term licences allowed for most of them. We have noticed that many are actually willing to give selling crackers a miss, especially with the Chinese threat looming in the background,” says K Mariappan, a member of the Tamil Nadu Fireworks and Amorces Manufacturers Association and owner of Sri Arumugam Fireworks, which has recently gone online.

Online fireworks sales are crackling

It appears as though the online route is working. Abhilash Sankar, owner of mycrackers.com, has been selling crackers for the past four years, and feels that things are steadily improving.

He says, “I have seen revenues rise nearly three times every consecutive year. This year, the increase has been five-fold and the season is not even over yet.”

However, there are other problems. Storage is an issue for online sellers.According to Sankar, “We cannot make regular door-to-door delivery without having warehouses and storage points at many centres. But getting licence for a warehouse that can store firecrackers is a very difficult task. The acquiring of a single such licence costs up to 3 lakh.”

Anything sells online

Thanks to technology, almost everything is available online today. Even kitchen waste, literally, is available at the click of a mouse. Amazon and EBay are selling natural fertilizers and soil in their pages. Pasuthai.com, a Bangalore-based organic cow farm, also sells manure made from cow waste – or to put it simply – cow dung.

It is nice to know that we live in an era where even cow dung travels through virtual channels to reach our doorstep!

Fake online sellers on the rise

The rising popularity of online shopping appears to have triggered a new downside – fake marketplaces. Unscrupulous elements have taken to cheating unsuspecting buyers to make a quick buck by posing as online marketplaces and pretending to sell online. Buyers assume the websites to be genuine, and place orders. They end up waiting for their orders indefinitely if they have opted for cash on delivery. If buyers choose to pay through their cards, then they invariably fall prey to the fraudsters who misuse the card details to swindle money.

Gullible buyers falling into the trap

The cheats are striking in places like Mumbai and Pune. Those most vulnerable to these fake online sellers are the ones who submit their card details. Sandeep Gadiya, cyber crime investigator says that even if the ‘sellers’ refund the money; they already have the card details, which is dangerous enough.

He says, “Buyers end up punching in their card information into the portal to make a purchase and have their credit card compromised. In some cases, as soon as the credit card information is given on the portal, users get a message saying that the product is out of stock. Fraudsters go a step ahead and refund the amount, but they still have the user’s credit card information which is used later to extract money from the victim’s account.”

Most experts caution buyers to verify the source of the website before placing orders or giving out critical card information. “Verify the authenticity of the website from where you are purchasing. If you are in doubt, don’t buy,” says Kirtar Oza, cyber crime expert.

Online sellers – be wary

Indian online sellers should take necessary precautions to reassure buyers of their genuineness. Once a buyer loses faith in a site, they will stay away, and also caution their social circle against buying at the site.

One way to build trust is to have multiple security circles. Encourage buyers to leave reviews and positive feedback, which helps other buyers. Sale during the festive season is bound to be high, so online sellers should take prudent steps to ensure they are able to make the most of it.

Flipkart uses omni-channel route to attract more customers

ttract more customers

Store-King and iPay are online start-ups who use an assisted ecommerce model to attract customers in small towns. Ecommerce top dog, Flipkart is the latest to go down that road as it attempts to assist ecommerce novices, by setting up an offline presence.

No prizes for guessing which product Flipkart is using to debut with the new service. You guessed it. Mobile phones! The Mobile phone category contributes to 65% of sales on Flipkart. The latest offline revelation by the online marketplace is certain to increase that figure, by tapping into the population who are not yet familiar with the online world.

Building App nicely

The fact that Flipkart sold $200 million worth of phones during the five day Big Billion Days sale has recently come to light. This should bring big smiles to the faces of the Flipkart directors, if you consider that last year Flipkart sold $ 60 million worth of mobile phones at the single day Big Billion day sale. Alot has been said on the subject of Flipkart’s App-only strategy during the Big Billion Days sale. The Flipkart mobile app will still be the primary emphasis in the latest offline strategy.

How will it work?

Customers who are not comfortable using the internet to order goods can go to selected experience stores to view, touch and assess the product. Once the customer is convinced, then the shop assistant can help the customer to buy the product through the Flipkart app, which can be delivered to the house or be picked up from the store itself. This offline strategy will not only increase Flipkart sales, but will also convert more prospects to the app philosophy.

• Experience centres available across 30 outlets
• Experience centres available in 19 cities

Flipkart has currently tied up with mobile retail chain Spice Hotspot, but is in talks with at least ten other offline mobile retail chains, as it looks to rapidly implement the service. Brands including Motorola and Alcatel who retail exclusively with Flipkart, will also benefit from the offline offering.

“This is targeted mainly at places where online shopping is still catching up. Customers in tier-3 and tier-4 towns have heard about online shopping but are still circumspect. Once these customers got a taste of online, they would buy online the next time. This is going to be a big customer conversion tool for us in the smartphone category,” said Ankit Nagori, chief business officer, Flipkart.

Snapdeal enters strategic partnership with Yes Bank to smoothen financial supply chain

We are quite aware that delayed seller payments affect SMEs and micro-entrepreneurs’ businesses. One of the reasons that contribute largely to this delay is COD mode of payment.

As a solution for the same, Snapdeal has entered in a partnership with Yes Bank along with logistics company, Blue Dart.

The Basic Aim

As per this Economic Times news report, the primary aim of this alliance is ‘strategic interventions in the financial supply chains’.

Yes Bank’s banking product suite ‘Yes Transact’ will play a crucial role in this. It will equip the online marketplace leader to receive cash-on-delivery payments from BlueDart in a much faster and organized way. This way Snapdeal will be able to release seller payments swiftly.

According to this agreement, Snapdeal, Yes Bank, and Blue Dart will be integrated via Yes Transact for COD payments. Post the integration, Yes Bank will act as a collection banker and will handle Snapdeal’s cash payments collected by Blue Dart.

Streamlining COD payments

In spite of the rise of plastic money and incentives offered by etailers to encourage online payment, the fact remains that major ecommerce payments (60%) come through COD. This poses as a challenge for etailers as well as online sellers. Efforts are made to reduce COD with a long term view. But until that happens, streamlining COD like how Snapdeal is trying to do is the only solution.

Asit Oberoi, CEO of Yes Bank rightly stated, “The cash on delivery model is very important in the Indian e-commerce industry, and we are certain that our Yes Transact solution will bring in enhanced efficiencies offering significant value to the companies in managing their supply chain.”

Amit Choudhary, Senior VP – Corporate Finance at Snapdeal also identified that COD is the most preferred mode of payment.

He added, “The dominant mode of payment for a large portion of online customers continues to be cash on delivery, this in effect adds time to the payment cycles for sellers. With this partnership we are confident that we can improve payments cycles and help our sellers become more successful.

Fashion etailer Myntra’s target – $5 billion GMV by 2018

The online fashion turf is heating up! On one hand, ecommerce giant Amazon is all set to be India’s one-stop fashion shop. But its app-only etailer Myntra that’s winning in the online fashion department.

Myntra’s goals – $1 billion GMV by 2016 and $5 billion by 2018-2020

ETRetail reports that the fashion etailer is positive about crossing $1 billion GMV by 2016, which is double of its current GMV – $500 million.

Newly appointed CEO of Myntra, Ananth Narayanan said, “Currently, we are about $500 million in GMV. We plan to double it to $1 billion in 2016 and are aiming at a $5-billion GMV by 2018-2020 timeframe.”

Private labels will help them to achieve profitability

Goals are high and to make it a reality, Myntra is going to focus on private labels and exclusive fashion brands. Nearly 20% if its sales revenue comes from private labels and that’s why it makes sense to introduce new private brands.

The company recently launched “All About You”, its clothing line designed by popular actor Deepika Padukone. During the launch, Narayanan shared, “20 percent of our GMV is fashion brands. We hope to keep it at 20-25 percent. My sense is that this brand (“All About You”) will be $ 100 million in two years.”

In the past, the fashion etailer had successfully launched private labels like Roadster, HRX, Anouk, Dressberry, and Keek n Kooch.

Focus on app-only strategy will continue

For those still hoping that Myntra will revive its desktop site, give it up. It’s not going to happen taking Myntra’s growth strategy into account. The company is optimistic about the app-only move leading them to $5 billion GMV.

Narayanan revealed, “Our GMV is 60 per cent higher than what it was in pre-app days last year. Of course, we saw a 10 per cent dip in sales after the migration (earlier this year), but that was expected in the short term.”

Therefore, the etailer has big plans for its app platform.

“I want to make sure that we introduce Myntra Version 2 that we are planning in early November. It would have a bunch of features for creating social network, sharing and style forums where people can ask questions and get answers. A bunch of features are going to be introduced very soon which will be very helpful to consumers”, Narayanan disclosed.

Myntra is quite clear that m-commerce is the future and that you have to win in mobile to survive. And considering that the fashion etailer recorded a 6X jump in traffic and nearly 4-fold increase in revenue during Big Billion Days, who can say they are wrong?