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.

Housing.com (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.

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?