Monday 15 February 2016

Online luxury shopping picks up pace in small cities

A couple of years ago, buyers hesitated from buying high-end luxury products online. But things have changed drastically now. Online marketplaces that sell exclusive designer and luxury products online are thriving.

From well-travelled to aspirational buyers

Online luxury portals like RockNShop, Exclusively, Pernia’s Pop Up Shop, Luxepolis, Elitify and others are experiencing huge growth. From clothes, home décor, fashion accessories and beauty products, customers want to own high-end luxury brands irrespective of the heavy price tags.
Etailers feel that buyers’ desire to own luxury brands is fueled by exposure to global fashion trends through affordable travel, movies, television and social media.
“There is money in these markets, but there is no access to luxury brands. As Indians acquire global tastes thanks to affordable foreign vacations, influence of Hollywood and Bollywood, and the Indian diaspora, they are looking to own foreign luxury brands,” saidVijay K.G., CEO and founder of Luxepolis.
Aspirational buyers with purchasing power from small towns and cities of India are treating themselves to Dior, Gucci, Emporio Armani, Hermès, and Chanel. This was made possible by ecommerce as buyers from India’s Tier I and II cities, where brick-and-mortar stores of premium brands don’t exist, got access to luxury products, discounted & pre-owned items and EMI payment facility through online shopping sites.

The growing Indian luxury market

IOS had earlier reported how India’s luxury market is growing at CAGR of 25% and it will exceed $18.3 billion by 2016. It has also been observed that 85% of prospective buyers search for luxury brands online. Therefore, it doesn’t come as a surprise that online luxury shopping trend is growing exponentially.
Demand from non-metro cities is one of the biggest reasons why online luxury market is growing in India.
In one of IOS’s interviews, Inthree’s founder Ramachandaran Ramanathan had stated, “The biggest problem is we look at a rural market from urban flavour and from patronizing eyes. The buying power, what pace they can buy, buying preferences, everything changes with district to district. But overall they are aspirational customers. Not very different from urban buyers.”
It’s heartening that ecommerce is enabling aspirational buyers from small towns to buy whatever they wish to – be it a Pillow or Prada.

Average online order on Valentine’s Day touches Rs.5,000; Men are biggest shoppers

People across the world celebrated Valentine’s Day last weekend. The ones who had the real reason to celebrate and gained the most were ecommerce players as love-struck buyers shopped online until their heart’s content.

This year around Valentine’s Day:

  • > The average order value was between Rs 3,000 and Rs 5,000, which is bigger than Diwali
  • > High number of orders from metropolitan cities as well as tier I & II cities
  • Majority of buyers were from the 25 – 35 years age bracket (high disposal income & desire to shop online)
  • Men, the biggest spenders on Valentine’s Day

  • One would associate the mushy day of love with women, but turns out men were the biggest buyers and heavy spenders around Valentine’s Day.
  • “You’ll be surprised to know that men are the biggest buyers of soft toys online. Even during this period, men are outspending women while buying gifts,” shared Rahul Taneja, VP – Category Management at Snapdeal.
  • In fact, marketing campaigns around the world are mostly targeted towards men during Valentine’s Day.
    From buying soft toys to gifting intimate wear, online stores have made shopping a comfortable affair for men. Online sites such as AmazonSnapdealJabongMyntra andFlipkart came to the rescue of clueless late-shoppers as they offered Valentine’s Day special looks, offers, gifting tips & ideas and themes.
  • A lot more than chocolates and cards

  • The top selling product categories were fragrances, soft toys, clothes, jewellery, fashion accessories and lingerie.
  • According to Sudhanshu Gupta, VP, Paytm, “Valentine’s Day period sees a significant jump in gifting-oriented product categories such as beauty and personal care, apparel, soft toys, fashion accessories and even electronic and mobile accessories. These categories have seen a jump of more than five times during this period and the trend is expected to continue with a growth rate of 700%.”
  • Many experimented with their choice of gifts this year. From gadgets, customized items, adult toys and adventure activities, buyers opted for the unconventional route.
  • Flipkart delivered GIFs on Valentine ’s Day. The #FlipkartGIFdelivery clicked with social media enthusiasts, as it was creative and engaging.
  • While explaining how the online sales of adult toys picked up around this time, CEO of ImBesharam, an Adult Lifestyle online store, Raj Armani revealed, “For Valentine’s we saw sales spike up 1.5 to 2x. In just two weeks we have got over 2,400 orders, of which most are specifically for women.”
  • Same-day and next-day delivery climbed up

  • Etailers raked in big moolah as premium delivery service of same-day and next day delivery was in great demand. Unlike festive season where people plan and place the order much in advance, on Valentine’s Day, buyers shop at the last minute and 2-5 days delivery schedule doesn’t work either.
  • An Amazon representative said, “Certain segments, which are V-Day focused, have seen lot of traction of course. As a consequence, that has been an upwards graph in same and next-day deliveries as consumers don’t want to get their orders delivered after the 14th.”
  • We have our very own big Festive Season Sale period between October – December. Etailers also want to create a different range of shopping events besides festivals and end-season sales, as additional revenue is desired by all. Something like US’s Cyber Monday and Black Friday sales or China’s Singles Day. Flipkart has managed to do a bit with Big Billion Days. Valentine’s Day is also emerging as one of the biggest online sales in India as people tend to spend more on love.

    Binny charts roadmap for Flipkart; 4 key areas outlined

    Flipkart’s newly minted CEO; Binny Bansal has outlined his thoughts for the ecommerce bellwether.

    Flipkart is looking at four main aspects to propel the business forward:

    >Supply chain
    Binny Bansal is planning to concentrate on the two areas he is familiar with; ecommerce and supply chain.
    To begin with the plans for supply chain management, Flipkart’s has registered its logistics arm, eKart as an independent unit to generate more income.
    Bansal says, “We are taking a big bet on externalising eKart, which will start to work with other businesses apart from Flipkart and Myntra.” Flipkart is betting on eKart big time to bring in the moolah.
    Advertising has been launched last year, and will aim to gain traction this year.
    Regarding payments, Bansal is cautious, and wisely intends to take things one at a time.
    He says, “I don’t think anybody has solved payments. There is some traction out there but we don’t believe that it’s a done deal.”

    Faith in CEO

    An ex-employee of Flipkart at a senior executive position said, “Quality of customer service will get back on track and profitability will get streamlined better under Binny. What you will not get is something as drastic as app-only.”

    Flipkart is trying its best to keep pace with its rivals. Snapdeal and Paytm are backed by Alibaba, while Amazon has launched many a strategy to keep its sellers and buyers happy. In such a competitive climate, Flipkart is doing everything to sprint ahead of the herd.

      Sunday 14 February 2016

      Binge spending on ads, discounts, leads to higher losses for marketplaces

      Yet another year marks the increase in losses for the online marketplaces. Leading players like Flipkart, Amazon and Snapdeal have managed to hang on. While the companies have had losses, their revenue growth stands taller than the previous year.
      However, others have not fared as well. Real estate, food and medical technology have witnessed big losses.

      Industry wise break-up – what is draining the resources?

      In a report brought out by Kotak Institutional Securities, analysts Kawaljeet Saluja and Garima Mishra observe that most companies (particularly those in real estate) are spending unnecessarily on ads. Companies are also spending heavily on employees, resources, and technology. With the result, even though there are good sales, the losses are steadily climbing.
      On the other hand, Zomato and Food Panda, leading players in food, have tried to curb the ballooning losses by cutting costs. They have closed operations in some cities, resulting in employee layoffs. They are choosing to focus on investing in operations.

      Remedial measures

      Jabong and Myntra have already announced their strategy. Myntra plans to focus on its private labels, while Jabong has decided on the opposite. Myntra is also steadily bringing down its discount policy.
      “Flipkart seems to have lost market share in FY15, as Amazon and Snapdeal ramped up sales. We believe recent initiatives of Flipkart such as adding sellers aggressively, greater focus on its logistics business and opening it for third-party business, and the introduction of new categories (Flipkart Nearby, second-hand goods) is intended to help it maintain its lead over its peers, as well as add new revenue streams,” said Saluja and Mishra in the report. (which spent on advertising heavily enough to bring down the collective performance of the real estate industry), is working on reducing its advertising and is looking at bringing down its employee count.

      Snapdeal assists Dabur with Ayurvedic e-store

      Ecommerce marketplace Snapdeal, who helped successfully re-launch Maggi noodles in India is now turning its focus to selling something a little more traditional. Ayurvedic medicine is as old as time in this country. Keeping this in mind, Snapdeal has tied up with leading manufacturer, Dabur to sell the companies popular LiveVEDA health products online.
      • The Indian ayurvedic industry is estimated to be worth Rs. 50 billion
      • The market is growing at a steady 10-15 per cent rate

      Healthy competition

      Dabur already sells its products online, but keeping in mind the rise in stiff competition it has opted to partner with Snapdeal. So who are the other players in the market? Hindustan Unilever is selling its Lever Ayush brand through online marketplaces. Kaya, Biotique and Patanjali Ayurved all sell through ecommerce marketplaces, while Himalaya has its own e-store and at the same time also sells on big marketplaces.

      Paytm to invest Rs. 500 crore in logistics to aid sellers

      Noida based etailer Paytm, incurred a loss of Rs. 372 crore in 2014 after shifting to ecommerce platform. But the heavy loss hasn’t deterred the company one bit as it is looking to invest a staggering Rs. 500 crore to expand its logistics network.

      Investment in logistics more than doubled

      In the financial year 2015-2016, Paytm spent Rs. 200 crore on logistics. In the coming fiscal year, it is planning to invest Rs. 500 crore, which is more than double compared to this FY. The funds will be utilized to build fulfillment centres across the country and to tie-up with more delivery partners.
      Sudhanshu Gupta, AVP, Business at Paytm shared, “We are aggressively investing in increasing our logistics services for merchants and aim to have 50 third-party fulfilment centres by the end of this year from 19 now.”

      Online Marketplaces reserve a major chunk of funds to boost supply chain

      Snapdeal is busy setting up huge warehouses in various cities to maintain their growth. A week back Flipkart poured $100 Million (Rs. 666 crore approx.) into supply chain and expressed desire to double its warehousing capacity. Amazon is building a global delivery network and recently invested Rs. 1,980 crore, a major portion of which will go in creating fulfillment centres and warehouses.
      But unlike other players, Paytm will rely on third-party warehousing & courier partners.
      Gupta explained the reason behind this strategy, “We will stick to third-party FCs (fulfilment centres) and courier partners because this is a more scalable model. It takes less investment and we are able to take advantage of their goodwill. Hence it is better to partner or strategically invest in them rather than trying to build a special vertical for this.”
      Investing in existing third-party delivery partners rather than building a logistics network from scratch does seem more practical. Maybe that’s why Paytm’s founder Vijay Shekhar Sharma is confident that his company will break even by 2017, way before its rivals.

      Thursday 11 February 2016

      eBay gives sellers 3 month window to become ‘top rated’

      Last month, IOS reported that eBay was upgrading its dashboard and also revamping its Seller Evaluation standards, which received some interesting feedback from online sellers. You can check the article and comments out right here.
      The date for the transition was given as 20th February 2016, but now eBay has had a rethink and is giving its online sellers an extended 3 month window to familiarise with the new evaluation standards.

      eBay had earlier stated:

      Moreover, even after 20th February 2016, we will try to offer support to those sellers who have seen any negative impact on their seller rating for an extended time period.”

      The good news is that eBay has confirmed that online sellers will not receive any negative rating as a consequence of the new evaluation standards, until May 20th 2016.

      Sellers keep in mind:

      >  eBay will consider your account status as of 20th January
      If your seller standard on 20th January was classed as ‘top rated’ and your ‘if we evaluated you today’ status is given as ‘below standard’, then it will get overridden and be recorded as ‘top rated’ until 20th May.
      >  Please note, the above points are only for negatively impacted accounts
      >  If by 20th February your account status is already positively moving in the right direction than that new account status will be taken into consideration
      Recently it came to light that the once popular marketplace among online sellers and customers in India is now losing ground. For this latest change in seller evaluation standards, eBay has decided to create educational tools and webinars for its sellers too make a smooth changeover. These small initiatives by eBay will go a long way in rebuilding trust with online sellers.
      What do you think?

        Online to offline model to help Paytm break even sooner than rivals

        Leading m-commerce firm Paytm has borrowed a leaf from Alibaba, and is planning a new approach to improve its fortunes. According to Vijay Shekhar Sharma, founder of Paytm, this method will help the company break even in as early as 2017.
        The company also plans to hike its GMV in 2016. Sharma explains, “With a focus on O2O and our other businesses including wallets and recharges, we expect to do GMV of $10 billion by end of 2016.”

        How does online to offline work?

        In O2O, shoppers look up products online, but purchase them from local stores. Paytm is planning to involve local stores for this exercise. This would be of mutual benefit. Those sellers who do not want to go online can take advantage of an online customer base through Paytm.
        This model was introduced by Chinese ecommerce giant Alibaba. The company owns nearly 25% share in Paytm.
        “Every other marketplace is trying to find its niche. We are optimistic that O2O will drive our business very fast. We are also identifying other categories that we can trade through O2O model. Cars and bikes is a big opportunity and we are exploring that,” says Sharma.

        Offering for sellers

        Paytm plans to build warehouses this year to attract more sellers. The company has about 1,500 sellers in major cities. This year, it plans to add 15,000 more by June in 50 cities. Online sellers, are you listening?

        Amazon to extend financial aid to sellers; plans global delivery network to compete with Alibaba

        “Sellers form the backbone of our business,” asserted Rohit Kulkarni, Senior Manager – New initiatives, Amazon India. And to keep its spine healthy and happy, the online marketplace is planning to offer loans to its sellers.

        Working capital loans to earn sellers’ loyalty

        Retaining top-sellers is high on the priority list of all ecommerce biggies. And offeringfinancial assistance is one way to stop sellers from migrating to other platforms.
        Amazon had declared their plan to offer loans to sellers in India in June last year. Soon after in September, they launched the pilot finance program by collaborating with third-party seller financing platform, Capital First.
        This time the ecommerce leader will provide short-term working capital loans to selected sellers. The objective is to assist merchants in stocking inventory and expanding their business.
        Key features of this service are:
        By-Invitation-Only loan program
        A credit rating mechanism will determine loan-worthiness of sellers
        Collateral free loans at low interest rates
        Loans range from Rs 5 lakh to Rs 2 crore
        Interest rate 13-15% for a period of 4-6 months
        Gopal Pillai, Director & GM, Seller Services, Amazon India said, “Access to working capital is the biggest hurdle for sellers. With this we are minimising the fiction and barriers for the sellers to get loans and helping them focus on growing their business on our platform”.

        Amazon designs ‘Dragon Boat’ to compete with Alibaba

        While the above loan initiative will help Amazon to deal with national competitors, the American etailer also has to worry about international competitors. The rivalry between Alibaba and Amazon is legendary. India being their latest battleground, both the companies are trying hard to overtake each other.
        Alibaba’s trick is to support Indian etailers like PaytmSnapdeal and Flipkart and weaken Amazon’s position in India.
        Now Amazon has launched ‘Dragon Boat’ project to compete with Alibaba at a global level. The project is rumoured to be a global shipping and logistics network, which will help to reduce the gap between sellers in China & India and buyers across US & Europe.
        As cross-border ecommerce is growing, Amazon wants to build a strong logistics & delivery network spread across the world, which will help them to fight against Alibaba that also wants the coveted Global Ecommerce Leader Tag.
        “The new business will locate Amazon at the center of a logistics industry that involves not just shippers like FedEx and UPS but also legions of middlemen who handle cargo and paperwork associated with transnational trade. Amazon wants to bypass these brokers, amassing inventory from thousands of merchants around the world and then buying space on trucks, planes and ships at reduced rates. Merchants will be able to book cargo space online or via mobile devices, creating what Amazon described as a “one click-ship for seamless international trade and shipping,” stated a Bloomberg report.

        Wednesday 10 February 2016

        Government strongly considers 100% FDI in ecommerce; closer to Marketplace definition

        The government is considering permitting 100% foreign direct investment (FDI) in the marketplace format of e-commerce retailing with a view to attract more foreign investments.
        The norms on FDI in the sectors of e-commerce, and IT and ITeS are expected to be part of detailed guidelines, which would be rolled out soon by the government, sources said.
        Last week, a group of senior officials from departments of DIPP, corporate affairs and economic affairs, among others, discussed these matters in great detail. According to sources, the DIPP has suggested that 100% FDI should be allowed in “marketplace model e-commerce” activities. In such a model, the e-commerce company provides an online platform for buyers and a sellers.
        At present, global e-tailer giants such as Amazon and Ebay are operating online marketplaces in India while homegrown players such as Flipkart and Snapdealhave foreign investments even as there are no clear FDI guidelines on various online retail models.
        An e-commerce firm carry its business either through marketplace model or inventory based model. In the inventory based model, a company owns and keeps the goods in warehouses.
        The officials also deliberated upon the definition of “e-commerce”. It may broadly cover transactions between buyer and seller through electronic mode like internet, mobile and televisions.
        The Department of Industrial Policy and Promotion (DIPP) is working on guidelines for e-commerce sector in the backdrop of ongoing tussle between online and offline retailers. The department has already carried out stakeholders consultations with states, e-commerce companies and other departments.
        At present, 100% FDI is allowed only in business-to-business (B2B) e-commerce and not in the retail segment.

        Amazon raises the stakes; pumps Rs. 1,980 crores into India

        In keeping with Jeff Bezos’ promise to invest in India, Amazon has added Rs. 1,980 crores to its Indian arm. The cash-rich company put in Rs. 1,696 crores in Amazon India in December 2015.

        Big Money! Big Results!

        Amazon has been trying to maintain traction in the Indian ecommerce market since it entered the scene in 2013. Its main contenders have been the home grown companies Flipkart and Snapdeal.

        Active seller base boosts inflow of funds to India

        Amazon has found great incentive from its increasing seller base, which has encouraged the company to pump in funds in multiple rounds.
        “We’re really encouraged with what we are seeing, both on the customer side and the seller side,” said senior Vice President and CFO, Brian Olsavsky, “About 90 per cent of our sellers are using our logistics and warehouse services. And as a result, we’ve tripled our fulfilment capacity year-over-year.”
        The company has spent a large chunk of its funds in creating fulfilment centres and warehouses.
        As Olsavsky says, “India is a different market and does not have a lot of the same ready fulfilment options that some other countries did. We see that as an opportunity.”
        The fact that Amazon has access to heavy funds might cause alarm to local players like Flipkart, who is having a tough time in matching the kind of moolah that the US based Amazon is able to stack up.
        Reports suggest that Alibaba would like to acquire stakes in Flipkart and Snapdeal, but is finding it too costly.

        Snapdeal introduces new product listing feature on Seller Panel

        Snapdeal sellers can soon say goodbye to emails for listing products as Snapdealhas introduced a new feature that allows you to directly list your products on the Seller Panel. The new procedure has been implemented to speed up the process, instead of using tedious emails. A demo video is available once you log on to the Snapdeal Seller Panel.

        Steps to list products through your panel:

        1. Log into your panel and go to the catalog tab on the left navigation panel
        2. Click on ”Add Product’ tab on the right corner
        3. Get started with new listings
        “We urge you to route all your listing requests through Seller Panel instead of writing a mail,” stated an email from Snapdeal.
        Sellers this process is still in its infancy, so let us know how is its usability. Are there any obstacles or is it smooth sailing?

        Flipkart introduces Gourmet Food & Nutrition category

        Last April, Flipkart announced plans to create an in-house grocery category and In October it launched the Flipkart Nearby mobile app, in Bangalore. Flipkart has now introduced a gourmet food and nutrition category on its website.
        The most stocked segment is Health & Nutrition with 1,261 products already listed, while Bakery and Baking Essentials has only 5 products listed so far. The products are refined by brand, food preference, price, added preservatives, dietary preference and off-course discounts.

        Gourmet & Speciality shop:

        • Coffee & Tea
        • Chocolates & Candy
        • Oils & Vinegar
        • Snacks
        • Pasta & Noodles
        • Sauces

        Health & Nutrition shop:

        • Dry Fruits
        • Protein Supplements
        • Vitamin Supplements
        • Organic
        • Edible Seeds
        • Oats
        We have recently witnessed the rise of exclusive grocery launches, for example when Snapdeal re-launched Maggi noodles. Promoting Impulse shopping in online grocery is another tactic slowly taking off. We expect Flipkart to take advantage of these trends as it looks to break into the grocery segment and compete with the likes of BigBasket, Godrej Nature’s Basket and Reliance Fresh. Mind you, Peppertap and Grofers have shut down operations in a number of big cities recently, so we await to see Flipkart’s long term strategy.
        Are you an online grocery seller? What has been your experience with online marketplaces so far?