Amazon requests time to adjust operations, but why is it a lone battle for the etailer?

The clarification of the terms of the Foreign Direct Investment (FDI) by the Department of Industrial Policy and Promotion (DIPP) has sent leading marketplaces in a tizzy. The DIPP has clearly stated that FDI will be disallowed in the inventory model of ecommerce. The DIPP has also strongly stated thatdiscounts will not be allowed. This naturally puts online sellers in hot soup.

Amazon’s pot of woes overflows

The one hit most severely is Amazon. The DIPP guidelines have also stated that ‘one vendor cannot have more than one-fourth of sales on a platform’. This will directly affect the legality of Cloudtail, a seller that is a part of Amazon, whose sales accounts for more than the permissible 25%.

The US-based company has appealed to the DIPP asking for requesting for time till September to adjust its operations in accordance with the new rules. The company has drafted a letter through the Internet and Mobile Association of India (IAMAI) lobby group.

The letter says, “On behalf of the industry, we would like to state that the ecommerce companies already operating under this model would require some time to examine the provisions in greater detail and assess the impact, if any, on their business. This might include making necessary adjustments and changes in existing operational practices to comply in letter and spirit with the conditions explicitly detailed in the press note.”

It appears as though Amazon will have to fight this out alone. In a case of your misery my opportunity, local players including Flipkart and Snapdeal are reluctant to back this plea. Flipkart says, “We have always been compliant of all rules and regulations and will continue to adhere to the new guidelines as well.” Kunal Bahl had stated at the time of the new regulations that Snapdeal already conforms to the rules.

Seller is the king

Amazon has to therefore shift its attention to individual sellers, and gradually phase out the Cloudtail monopoly. Abheek Singhi, senior partner at Boston Consulting group advises, “While there is massive scale in consumer electronics, ecommerce companies need to strike a balance between the hyper growth that they have previously witnessed and a new push for profitability.”

While so far the thrust was on discounts, the rules now show that the sellers will run the show from here.

Will Alibaba’s entry give Indian ecommerce industry a makeover?

In the last few weeks, two major developments in the Indian ecommerce industry have the potential to be big game-changers. First, Alibaba’s direct entry. Second,100% FDI in the marketplace B2C format.

This means things are about to change for online buyers, sellers and etailers, once Alibaba sets foot in freely.

Popularity of AliExpress with Indian buyers

In spite of no promotional campaigns, Alibaba’s online retail service AliExpress has managed to grab attention of many Indian buyers. The etail portal, which was launched in 2010 acts as a platform for Chinese SMEs to serve global buyers. For Jack Ma, AliExpress’s success is a window to India’s ecommerce potential.

It has been reported that:

• People looking for low-priced deals browse on AliExpress rather thanFlipkart, Amazon or Snapdeal
• Affordable mobile, computer accessories, soft toys, and artificial jewellery are the highest-selling product categories
• Demand from tier 3 & 4 cities, the highest

An executive of an ecommerce company revealed,

“They (AliExpress) deliver over 40,000 products every month. And that’s a conservative estimate. While most of the items shipped are low-ticket, ranging from Rs 200 to Rs 2,000 — the maximum demand for such products is from tier III and IV towns. And that’s what present ecommerce players in India are missing out.”

How Alibaba managed to do this? Most electronic products & accessories are sourced from China. Indian etailers add operational costs such as logistics, inventory holding, taxes and other miscellaneous charges to the final price. On the other hand, a Chinese merchant can sell the same product at 40% less price even after adding shipping and custom duty charges.

Sellers have pinned their hopes on the Chinese etailer

So far, Indian online sellers are extremely unhappy with the treatment etailers are giving them. Amazon India is still in the good books of sellers but Flipkart andSnapdeal are the least favourites.

Therefore, expectations from Alibaba are high, since it is known as a seller-friendly organization.

A seller, Anup left a comment below this IOS article on Alibaba’s 2016 entry,

“Welcome Alibaba to India. I think if they enter this e-commerce market in india to capture the major retailers, they should enter with their minimum commission and minimum charges. Because other companies they are charging higher commission and hidden expenses from merchants. Most of the merchants are not happy with India e-commerece companies because of their non-cooperation policy for the merchants. They work on clients basis attitude.”

Etailers will have to fight hard to retain buyers & sellers

Existing ecommerce players will have to fight at two fronts. First, offer products at affordable prices to match Chinese etailer’s pricing. Second, woo sellers to maintain its seller base and deflate poaching attempts.

The wooing has already started. From waiving shipping charges entirely to offering full compensation on returned damaged products, etailers are doling out incentives to sellers in order to please them. All thanks to the Chinese biggie.

“It’s the sellers and the consumers who stand to benefit most from the dogfight between the ecommerce players. It’s not that ecommerce players have become generous to sellers. They are being forced to do so because of the threat from Alibaba,” asserted Darshan Mehta, a seller from Mumbai.

Merchants feel that with Alibaba’s entry, Indian ecommerce companies will finally listen to their grievances. If not, then they are more than happy to take their business on the new platform.

“I would have never imagined such a thing some three years ago. But cut-throat competition means ecommerce players are going all out to woo sellers. Consumer loyalty would be hard to achieve, so they are trying their luck with sellers,” said a Delhi-based seller Rajat Sethi.

Online Sellers, what are your expectations from Alibaba? Lower margins or better return policy? Please leave your comments below.

Change in Plans: ShopClues doesn’t want to focus on rural India?

Just last month we reported about marketplaces shifting their attention towards villages to explore the possibility of low returns. Shopclues caught attention with its unusual logistics; a bullock cart, which was used to deliver a Samsung LED TV to a remote village in Andhra Pradesh.

The numbers looked promising too with 60% of sales coming in from small towns and cities and a 20% chunk of sales from rural areas in the country. Shopclues’ vice-president of operations and strategic initiatives, Vishal Sharma even said, “In rural areas people are not in a hurry to buy products.”

It seemed like an ideal situation, so what changed?

Shopclues Goals

The Gurgaon based marketplace is looking to:

• Expand its seller base
• Make inter-zonal shipments the norm for quick delivery and low cost logistics

The chief business officer at Shopclues, Radhika Aggarwal claimed, “We are moving towards dividing the country into different cities as opposed to regions for our shipments.” She further explained, “The idea of shipping from within the zone of a customer works perfectly for structured categories. The unstructured category might or might not benefit from this.”

She also mentioned that the marketplace will be aided by its local courier partners for deliveries within zones. Shipping within a zone would mean:

• 25% of costs reduce
• etailer get better margins
• consumers enjoy better prices

Shopclues had initiated the neighborhood marketplace concept, (currently in the pilot stage), at Gurgaon. According to this feature delivers should be completed in an approximate time of 4-6 hours. This could give them the edge they need to outrun competition, now that discounts have been slashed.

Where does The Marketplace Stand Now?

Shopclues is worth a whopping $1.1 billion and the online marketplace believes by mid-2017 it will acquire profitability. Aggarwal revealed they plan on multiplying their current number of 4 lakh sellers into 12 lakhs by the end of this year. In addition to that she said this would improve their regional selections and products price ranges in tire 2 and tire 3 markets.

As for its local engagements, Shopclues has been reaching out to local onboard merchants in south India. The plan is take their online entrepreneurship business contest to live television for limited period.

So does this mean they’ve abandoned the rural market scene?

Flipkart counts on Top Sellers, Dabbawallas, Ekart, & new Marketing Campaign

As ecommerce players put their heads together to accommodate recent FDI developments, we can already see the changes etailers are making to stay on top. Here are Flipkart’s latest updates, some new and some renewed.

Top sellers to the rescue

Courtesy the 25% sales cap from single seller, Flipkart is forced to reduce WS Retail’s business. Due to this, the etailer is now focusing on its top sellers through a programme to improve buyers’ shopping experience and compete with other players.

“This programme which we started in October 2015 is aimed at encouraging high quality sellers who can serve our customers better. The programme will support existing and new sellers on product quality, customer service, packaging, logistics and supply chain,” shared a Flipkart representative.

Partners with Mumbai Dabbawallas for delivery

As last mile delivery has always remained a sore point, Flipkart partnered with the famous Mumbai Dabbawallas to combat this issue in April last year.

While sceptics felt that this alliance may not work, but turns out it is functioning quite well. Dabbawallas transform into Flipkart’s delivery men after their regular shift gets over at 6 pm and fulfil orders from 6-10 pm.

There were few glitches initially like delay in delivery due to cycles being main mode of transport for dabbawallas. But it was resolved soon after Flipkart presented motorbikes to them. Future plan is get more bikes and enrol the tiffin-service executives to deliver grocery.

eKart will manage Paytm’s logistics

After reacquiring eKart in September last year, Flipkart had made its intention clear to treat the logistics arm as an independent logistics provider and revenue source.

Latest reports suggest that eKart is going to manage Flipkart rival Paytm’slogistics. Sources reveal that Paytm will start using the logistic provider’s service in the coming two weeks.

Confirming the news, Sudhanshu Gupta, VP – Paytm said, “We have created a network of national and local logistics partners who empower sellers to ship to customers across the country in an efficient and effective manner. eKart will join the network along with Delhivery, GoJavas, Blue Dart and many more.”

Renewed Buyer Focus to earn trust

Now that discounts will have to phase out eventually, etailers like Flipkart are focusing on their brand positioning strategy to gain buyer’s trust.

Earlier the ads were all about offers, discounts, deals and price but now it’s all about trust, convenience and easy returns. The ad campaigns have become morelocal, relatable and speak to a wide buyer base including people from small towns & villages, senior citizens, and tech un-savvy.

Shoumyan Biswas, VP, marketing, Flipkart shared, “While the start has been great, we feel the journey has only just begun especially when the majority of the country is yet to experience online shopping. Over the next few weeks you will see the campaign get amplified by a strong social, digital and outdoor plan reaching out to national metro as well as regional markets.”

Although, this renewed advertising strategy was set in motion way before the new ecommerce policies were spelled out. Great timing, isn’t it?

25% cap on sales for marketplace ecommerce player is reasonable

Ruling out any relaxation in the 25 per cent cap on sales from a single seller for e-commerce marketplaces, a top government official today said the limit is reasonable and fair. Permitting 100 per cent FDI in marketplace model of e-commerce, the Department of Industrial Policy and Promotion (DIPP) has put a condition that an e-commerce entity will not be permitted more than 25 per cent of the sales through its marketplace from one vendor or their group companies.
Some e-commerce players, industry experts as well as IT industry body Nasscom have said that restricting sales of a vendor to only 25 per cent of the sales in the marketplace may prove to be restrictive, more so if the vendor sells high value items.
When asked, DIPP Secretary Ramesh Abhishek said: “25 per cent is a fair number because we want it to be a marketplace model and not inventory”.
He said that if a firm is providing a marketplace model platform, sourcing 25 per cent from one vendor is reasonable and large number of sellers can sell through that platform.
Nasscom has said that due to this cap the industry might face difficulties in case of sale of electronic items, where a vendor maybe offering exclusive access to certain items or discounts.
Talking about the rider that e-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods and services, he said that such players are not allowed to announce discounts.
Announcing discounts by marketplace model players will infringe the law, he said.
“Discounts can only be given by the owner of the goods or provider of services,” another official said.
Some industry experts have said that the guidelines on pricing may impact big e-retailers.