Government Defines Rules for E-Commerce Companies

The Indian government has established new rules for e-commerce enterprises in the country, with immediate effect. These rules bring relief to traditional retailers who have been unable to compete with the deep discounts and wide reach of e-commerce giants like US based Amazon and India based Flipkart.

In its press note released on March 29, the Department of Industrial Policy and Promotion (DIPP) defined the online marketplace as an “information technology platform on a digital and electronic network” that facilitates transactions between buyers and sellers.

New sourcing norms now state that a single vendor or group company cannot be responsible for more than 25 percent of total sales of the online firm or platform. A 100 percent foreign direct investment (FDI) is allowed in the online marketplace model, i.e. the business to business (B2B) segment but not in the inventory based model or firms that directly sell goods and services to consumers using online platforms, i.e. business to consumer (B2C) segment. While firms can offer support services to businesses selling on their platform (warehousing, logistics, order processing, call center support, and payment collection), they are prohibited from making pricing interventions such as offering direct discounts, cash-back schemes, or “promotional funding” by indirectly funding the discounts provided by sellers.

The regulatory development comes at a time when online retail is expected to jump from two percent in 2014 to 11 percent in 2019. E-commerce firms have so far benefited immensely from massive foreign investments – previous regulatory ambiguity provided loopholes that seemed to conflate the inventory and marketplace models. The government’s move, therefore, levels the playing field between online and offline retailers. Existing and new online commerce platforms will need to restructure their businesses accordingly.

The Battle Turns Fierce Among E Commerce Players

The battle among the eCommerce players in India is going to intensify in the smartphone segment in 2016. The phenomenal growth of the smartphone business has made the competition stiff for all the eCommerce players. Adding to that the proposed entry of global giants like Alibaba is expected to make the path tough for all the online players. Smartphones is the most popular category among the online shoppers and the battle for the leading position in this segment is going to determine the success of eCommerce players.   

India is the second largest smartphone market in the world in terms of number of users. IDC predicts that by 2017, India is expected to overtake the US and become the second largest smartphone market globally. According to Gartner, sales of smartphones in India are on pace and will reach 29 per cent in 2016 and continue to exhibit double-digit growth in the next two years. Thus, there is an enormous opportunity for both domestic and global smartphone makers to leverage on the market potential. 

According to the Counterpoint Research, Flipkart tops the list, followed by Amazon and Snapdeal. The trio accounts for almost 90 per cent of the online smartphone sales volume. The biggest reason for Flipkart’s success in 2015 was its inventory led model and intensive advertising campaign. Snapdeal and Amazon also benefited from the inventory-led model. Eyeing on the youth, who are the major online shoppers for smartphone, smartphone makers and eCommerce marketplaces are introducing innovative strategies like “direct-to-consumer” model, to attract more consumers. Along with discounts, online quiz, cash on delivery, cash backs, marketing support, eCommerce players are trying to connect with the masses through digital platform and celebrity endorsements. 

The competition is expected to further intensify with players such as PayTM, Shopclues and others are aggressively promoting their platforms. Also players such as Snapdeal, Shopclues and PayTM are well positioned against Flipkart, Amazon from in terms of brand recall. The recent announcement from the Indian government on a new policy that allows 100 per cent FDI in eCommerce marketplaces will boost the competition between online marketplaces.

Considering the changing buying pattern among Indian consumers, smartphone makers are also becoming smarter and selective in choosing the marketplace. Certain vendors like Lenovo have introduced its Motorola range of smartphones exclusively on online marketplaces. According to the Counterpoint Research, Lenovo (including Motorola) was the biggest beneficiary of this trend, capturing 25 per cent share of smartphone sales through the e-commerce channels. This has helped Lenovo to jump to the number three spot in India’s smartphone segment. The new entrants, mostly Chinese brands, together captured almost half of the online sales segment. Though Indian brands overall were slow to get on the bandwagon as they heavily invested in offline sales channels, but Micromax, with its Yu brand, became the number one domestic brand across online channels. 

Industry experts says, with the entry of new players in the online marketplace, the vendors as well as the eCommerce giants will need to look beyond heavy discounting and try to focus more on value addition to retain their market share. 

Trends such as, mobile wallets and social commerce are going to be hot this year to create stickiness among the online shoppers. Also, it would be interesting to see that how the competition among the eCommerce players will benefit the end users in terms of better consumer experience.

The fashion portal ajio.com from Reliance is now live!

Reliance’s entry into ecommerce has been long awaited! Now that ajio.com, their online fashion portal is finally here, what does it mean for Indian ecommerce?

The Reliance Empire Takes on a New Avenue

Reliance is one of the best at doing business in India. With their love for diverse business like telecommunication, petroleum and physical retail, delving into ecommerce was just a matter of when, for the conglomerate.

Ajio.com targets big online spenders from the 18-34 year age group. The platform was named after the telecom unit Reliance Jio and the upcoming digital wallet Jio Money. Three months prior to its launch, Ajio was tested on Reliance employees.

Their online shopping platform ajio.com caters specifically to women, who enjoy fashion. It offers a wide collection of varied private labels in clothing and accessories. Besides the obvious categories of western and ethnic wear, the online store also has a section for fashion week collections, so you can shop right off the runway. That’s not all! You can easily grab yourself a slice of global fashion from Australia, Russia and other international fashion houses from around the world.

Around 60% of their merchandise comprises of items completely unique to the fashion ecosystem, says Ajio CEO, Sanjay Mehra. “This means we have a selection that you won’t find anywhere. Omni-channel and our Jio digital ecosystem sets us apart in terms of providing better presence and connectivity respectively to our consumers.”

The Mechanism Behind ajio.com

• Ajio is an omni-channel initiative that will capitalize on Reliance’s network of large retail stores, like Trends and Footprints. (At the moment the Reliance Group runs more than 2621 retail outlets all across the country.)
• Ajio will partner with at least 200 different international and national brands offering daily wear that is fashionable and affordable.
• The portal’s current category range includes lingerie, jewelry, footwear, maternity wear, bags, belts, night wear and other attractive wearable goods. Very soon, Ajio will extend its online offerings to men’s wear and kids wear.
• For the next two months, (multiple) third party logistic firms will handle deliveries to 15,000 pin codes.

Heating Up the Online Competition?

Hold on to your horses, Myntra, Jabong, Koovs, abof and every other online fashion outlet! There’s a new fashion portal in town (online) and they have something new to add to your domain!

The Goal

Last year, Mukesh Ambani, the chairman of Reliance Industries Limited (RIL), stated at his company’s annual general meeting, “With the advanced internet infrastructure built by Jio and a robust physical retail business built by Reliance Retail, we will create a differentiated e-commerce model for India. This model will entail seamless integration of online and offline while innovating across superior customer experience, delivery services and payment ecosystem.”

A huge portion of online retail is made up of apparel and footwear sellers, mainly due to its sizeable profits.  Reliance may have chosen just the right time to jump into ecommerce. With all the rules on capped sourcing and discount slashes, the existing players are the most affected.

Ajio will mainly focus on high-fashion designer wear from international brands, in-house brands and local designers who want to sell through this channel. This way it can differentiate itself from established etailers in the cultured online apparel market, which happens to thrive on discounts. And like Sanjay Mehra said, there’s also the prospect that their presence and connectivity among consumers will grow rapidly due to the Reliance Jio digital ecosystem.

Amazon adds Rs. 8,000 crore to capital; modifies ad strategy to win customers

Amazon India has increased its authorised capital from Rs. 8,500 crores to Rs. 16,000 crores. The company is pushing hard to overtake its main rivals Flipkartand Snapdeal. Thanks to the new DIPP rule that states that a marketplace cannot influence its sellers’ prices, leading online marketplaces are looking at other means of profitability.

The fresh round of capital will be used to finance advertisements, hiring, and discounts, says the company’s filing with the Registrar of Companies (ROC).

Why the mad rush to get the top spot?

Amazon’s Jeff Bezos declared in 2014 that the company indented to put in $ 2 billion in its India operations. Bezos has been making good that promise in a phased manner over the past few years. The reason for all the attraction towards India is the predicted market growth. A UBS report observes that the ecommerce sale in the country is poised to hit $ 46 to 60 billion by 2020, and Amazon is keen to own the largest share of the pie.

The US based ecommerce giant is particularly keen on making up for its loss in China, where Alibaba is the undisputed leader. Amazon has also been giving tough competition to its local adversaries in India with its focus on discounts and quick delivery.

No more discounts. What next?

Amazon is now trying a different tack to lure and retain customers. The company is targeting Tier 2 and 3 cities with its thrust on convenience, easy returns and trust. Its recent ad campaigns are also focussed on introducing older shoppers to online shopping. Says Ambi Parameswaran, brand strategist and advisor at FCB Ulka Advertising, “It is time e-commerce brands started promoting brand and network in earnest.”

So online marketplaces are now looking at alternate means to bring in the moolah. It had better work, or companies will find themselves in trouble with their investors.

Mobile marketplace Shopo has 1 lakh+ sellers onboard; Snapdeal’s zero-commission strategy working?

At a time when competitors were scouting for new features and acquisitions to add to its kitty, Snapdeal quietly relaunched Shopo as a zero commission mobile marketplace. According to latest reports, the mobile platform has supposedly cross the 1 lakh seller base.

In January this year, we heard the platform has 50,000 online sellers registeredwith it. By the end of the year, Shopo wanted to have more than 1 million sellers on board.

“Barely 0.1 per cent of India’s 50 million micro SMBs have an online presence, while a significant share finds itself unequipped to navigate entry-level barriers to online business to consumer (B2C) commerce marketplaces. The fast growth and adoption of the platform is a validation of our goal to become the destination for small and individual sellers across the country,” Komaravelly, Senior Vice President, Shopo said.

What helped Shopo?

The company feels that the following features helped them in achieving the predicted growth:

• No registration costs
• Chat based ecommerce experience
• Sellers can list their shops in 30 seconds or less
• Technological upgrades

The platform facilitates easy switching between other social media platforms and Shopo. This way, customers can exchange and share views and options with their peers on other platforms, while browsing Shopo at the same time.

The Shopo journey so far

Although Snapdeal acquired Shopo in 2013, it wasn’t until 2015 that it was relaunched as a zero-commission platform. Probably took everyone by surprise, and the speculation began about the reasons for the re-introduction. Most felt that it was to have an edge over Paytm, which had started its zero commission model for merchants selling on the platform.

In the absence of commissions and payment processing fees, merchants would surely flock to the platform to sign up. Small and medium businesses and home entrepreneurs who earlier hesitated to sell online could now try out their luck in the online world without making their pockets empty.

Looks like the strategy has worked so far. And looks like it will work as 2016 progresses too. Don’t you think?