MUMBAI | HYDERABAD: For Flipkart and Snapdeal, their annual sales bonanzas this festival season will be about establishing their dominance, but they are unlikely to draw on margin-eroding discounts as their weapons of choice.
Instead, the country's leading electronic marketplaces are set to rely more on category-specific discounts, exclusive launches and cashback schemes as they strive for record sales this festive season, according to companies executives and industry experts ET spoke with. In high-margin but relatively low-demand categories such as home decor and kitchen, online retailers are still likely to offer heavy discounts to boost sales, experts said.
But in established segments such as electronics, it will be up to the manufacturers and sellers to decide how steep the discounts should be, a marked change in strategy for online marketplaces in response to the red flags being raised around their business models.
Snapdeal's preview Diwali sale on Monday served as an indicator: Some of the steepest discounts were in categories such as home and fashion; cashback schemes were on offer through its recently acquired digital payments platform Freecharge, and the home page had exclusive offers on specific brands. On average, discounts offered by online retailers have dropped to 15-20% this year from 25% in 2014, and is expected to fall further to 10-15% next year, India Infoline said in a recent report.
The moderation is expected to help online retailers wean consumers away from heavy discounts in their search for profitable unit economics.
"Etailers believe that there is a high degree of demand elasticity. We believe they will be wary of moderating the discounting aggressively," analysts Sandeep Muthangi and Nandhish Dalal said in the report, adding that Indian online marketplaces are expected to spend a total of $7.5 billion on discounts by 2020.
Srinivas Murthy, senior vice-president-marketing, at Snapdeal, said customers can expect discounts of up to 70% in the fashion, home and electronics categories. "We are developing a host of solutions for our 150,000 sellers to help them to pre-empt demand, basis on data analysis of consumer purchase behaviour and stock-up on their inventory," he said. Flipkart announced on Monday that it will hold its annual 'Big Billion Day' sale from October 13 to 17, with discounts available only on its mobile application.
According to multiple reports, India's etailing market is expected to grow to around $50 billion by 2020 from $4 billion at the end of 2014, as companies aggressively chase gross merchandise value, or the total price of all the goods sold on a platform.
This growth has attracted global investors such as DST Global and SoftBank, besides overseas etailing giants like China's Alibaba Group and US-based Amazon, to aggressively pump capital in India to acquire customers at any cost.
But increasingly investors have started asking companies to show a path to profitability, delaying new financing rounds for leading e-tailers like Flipkart and Snapdeal.
According to India Infoline, marketing costs for etailers in India are as high as 30% of the gross merchandise value, as compared to 2.2% for China's Alibaba and 5.5% for Argentina's MercadoLibre. "My hope and prediction is that this Diwali will be the last one where etailers offer heavy discounts," said Alok Goel, managing director at SAIF Partners and former CEO of online recharge player Freecharge.
Instead, the country's leading electronic marketplaces are set to rely more on category-specific discounts, exclusive launches and cashback schemes as they strive for record sales this festive season, according to companies executives and industry experts ET spoke with. In high-margin but relatively low-demand categories such as home decor and kitchen, online retailers are still likely to offer heavy discounts to boost sales, experts said.
But in established segments such as electronics, it will be up to the manufacturers and sellers to decide how steep the discounts should be, a marked change in strategy for online marketplaces in response to the red flags being raised around their business models.
Snapdeal's preview Diwali sale on Monday served as an indicator: Some of the steepest discounts were in categories such as home and fashion; cashback schemes were on offer through its recently acquired digital payments platform Freecharge, and the home page had exclusive offers on specific brands. On average, discounts offered by online retailers have dropped to 15-20% this year from 25% in 2014, and is expected to fall further to 10-15% next year, India Infoline said in a recent report.
The moderation is expected to help online retailers wean consumers away from heavy discounts in their search for profitable unit economics.
"Etailers believe that there is a high degree of demand elasticity. We believe they will be wary of moderating the discounting aggressively," analysts Sandeep Muthangi and Nandhish Dalal said in the report, adding that Indian online marketplaces are expected to spend a total of $7.5 billion on discounts by 2020.
Srinivas Murthy, senior vice-president-marketing, at Snapdeal, said customers can expect discounts of up to 70% in the fashion, home and electronics categories. "We are developing a host of solutions for our 150,000 sellers to help them to pre-empt demand, basis on data analysis of consumer purchase behaviour and stock-up on their inventory," he said. Flipkart announced on Monday that it will hold its annual 'Big Billion Day' sale from October 13 to 17, with discounts available only on its mobile application.
According to multiple reports, India's etailing market is expected to grow to around $50 billion by 2020 from $4 billion at the end of 2014, as companies aggressively chase gross merchandise value, or the total price of all the goods sold on a platform.
This growth has attracted global investors such as DST Global and SoftBank, besides overseas etailing giants like China's Alibaba Group and US-based Amazon, to aggressively pump capital in India to acquire customers at any cost.
But increasingly investors have started asking companies to show a path to profitability, delaying new financing rounds for leading e-tailers like Flipkart and Snapdeal.
According to India Infoline, marketing costs for etailers in India are as high as 30% of the gross merchandise value, as compared to 2.2% for China's Alibaba and 5.5% for Argentina's MercadoLibre. "My hope and prediction is that this Diwali will be the last one where etailers offer heavy discounts," said Alok Goel, managing director at SAIF Partners and former CEO of online recharge player Freecharge.
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