Online shopping is great but retailers need to adopt a whole lot of best practices or else they will lose their credibility in the nascent Indian online retailing market
That Flipkart’s Big Billion Day sale earlier this October is still afresh for many reasons—there are winners and losers—some got a deal and some did not. Amidst tall claims (Flipkart said it clocked `600 crore worth of merchandise in just about 10 hours on the sale day), the company’s competitors also claimed mind-boggling numbers. (Snapdeal is said to have made `1 crore a minute as per some reports).
As we look through the fancy numbers game, one thing is clear—the eCommerce companies and its distributors took the cake and saw their cash registers ringing. In an age in which customer is king—do they really benefit of sales such as this claiming rock bottom prices?
It’s a Gamble
First off, let’s be very clear. It’s not just only about Flipkart or the issues it faced on the sale day. It’s about the state of eCommerce and online retailing in this part of the world. Both the retailers and the consumers need to mature. For instance when someone is offering a huge discount on a merchandise which costs a lot on physical retail stores and the same is offered at huge discount—it looks impressive at first glance—but smart shoppers always look at the fine print—which are many. It’s like a low-cost air ticket which once booked, leaves no scope to change or cancel it.
So in the end Flipkart might have created a record of sorts, but some analysts and consumers said its credibility went down by few notches with disgruntled buyers taking on to social media and ventilating their ire on a sale that did not go out well as expected. Then its no wonder Flipkart was rather forced to acknowledge and apologize for its goof ups.
According to Sachin Bansal and Binny Bansal of Flipkart, they said “The Big Billion Day is an unprecedented day for us as this is the biggest sale ever in India. We are delighted by the overwhelming response few had on the sale day. With a range of exciting offers on quality products at disruptive prices available throughout the sale period, we have created history in Indian e-commerce.”
“Our technology team has been dedicated towards addressing errors and providing constant support to accommodate the largest scale of traffic and customer visits e-commerce has witnessed across the country. Our teams and sellers worked days and nights to make this sale a success and our efforts paid off. We got a billion hits on our site today and achieved our 24 hour sales target of $100 mn in GMV in just 10 hours,” they added.
That’s pretty rosy, rosy. Let’s look at the thorns now.
On the flip side, Flipkart apologized as well. In a blog post and a mailer sent to all customers who are registered with Flipkart it said, “ We did not live up to the promises we made and for that we are really and truly sorry”.
It further stated that, “It took enormous effort from everyone at Flipkart, many months of preparation and pushing our capabilities and systems to the limit to be able to create this day. We were looking at fulfilling the dreams of millions of Indian consumers through deals and offers we had painstakingly put together for months.”
There are key lessons to be learnt here. While Amazon is a seasoned global retailer and has mastered the art of retailing, its relatively very young in India—just about a year plus—but its larger global credentials and the kind of tech backbone gives it a huge edge as compared to competitors. As a matter of fact Amazon is a pioneer in ‘elastic computing’ and in many ways it pioneered the cloud as we know it today.
So apart from aspects like best and fair trade practices (there were accusations that Flipkart artificially increased the prices few days before the sale and gave discounts and in the end looking at some blogs and social media posts—the prices were almost the list prices not discounted ones), the technology infrastructure also came under duress due to the scale and volume of transactions.
The key learning here as per industry experts is that digital business means “co-opetition” – reaching new markets that will require working with competitors that offer marketplace sites and access to new customers, payment services to acquire global reach, or hosting services to achieve scalability and availability.
On the other hand, the other one big lesson for all eCom players is to create a tech backbone that is extremely agile and be able to take on such huge dynamic loads- it involves- server, compute, storage and all the key elements required for mission critical computing. Flipkart did realize this and stated, “An unprecedented 1.5 million people shopped at Flipkart (on the sale day). The load on our server led to intermittent outages, further impacting your shopping experience on our site.”
Further in the blog post Flipkart said, “We realize that the shopping experience for many of you was frustrating due to errors and unavailability of the website at times. We had deployed nearly 5000 servers and had prepared for 20 times the traffic growth – but the volume of traffic at different times of the day was much higher than this. We are continuing to significantly scale up all our back end systems so that we do a much, much better job next time.”
According to Gartner, “ The digital commerce platform market is maturing; incumbent vendors are investing in building out their commerce platforms, and those in adjacent areas, such as search, order management and marketing—both through organic development and acquisition,” said Vendors are increasingly focused on execution and winning new customers, sometimes at the expense of articulating future vision. Merger and acquisition activity is increasing, resulting in fewer digital commerce platform options in the market, but also serving to extend the commerce platforms of the established vendors.”
Experts say that digital companies will expand investments in personalization, digital marketing, Web analytics and big data in order to stay competitive. India has approximately 200 mn users on social networks, and it is an important channel to understand and engage with customers.
The eCom Opportunity
Let’s here look at why these players or competing so aggressively? It’s not a surprise when we look at the eCom market dynamics. Reflecting on this a recent observation from Gartner says that, “ The India eCommerce market will reach $6 billion in 2015 a 70% increase over 2014 revenue of $3.5 bn.”
“Digital commerce is at a nascent stage in India. However, India is one of the fastest-growing eCommerce markets in Asia/Pacific says Praveen Sengar, research director at Gartner. “India represents a $3.5 bn market, growing at approximately 60%-70% every year.
It represents less than 4% of the total retail market. B2C eCommerce leads the market in India, while B2B is limited to organizations that drive online channels to integrate with their partners and distributors.”
But what is interesting to note here is Mobile Commerce (mCom) will act as a springboard for eCom and compliment it as well. And this will help it gain traction from the humble 4% share of the retail market. Reflecting on this Gartner says, “ Mobile commerce is finding increasing traction in mobile shopping. Marketplaces, consumer product goods, and food and beverages companies have started investing in mobile commerce. However less than 5% percent of total digital commerce happens through mobile. Mobile commerce will help organization skip the desktop wave with increasing penetration of affordable smart devices with connectivity and a rapidly growing ecosystem to engage customers on mobile. 30% of traffic for eCommerce sites come from mobile and tablets.”
Let’s accept the fact. Retailing online is not that easy. The challenges are unique and many. Analysts like Gartner say that the limited internet penetration, low digital commerce volume, multiple payment models (e.g., cash on delivery, credit card and wire transfers), logistics and fulfillment challenges, higher return rates and low average order value is putting pressure on the profitability and viability of B2C eCommerce businesses. The B2B model is leveraged to drive efficiency in the supply chain. The biggest challenge is getting the business digital commerce strategy right and adequate investments in people, process and technology to engage with customers across channels, which has been ignored by Indian enterprises so far.
At the end of the day, yet again this is not just about Flipkart it’s an industry wide phenomenon. All the retailers must see this as a learning experience and try and perfect their processes leading to overall higher efficiencies. Since Indian eCom market is at a nascent phase, the credibility and trust of people on eCom vendors is of paramount importance. So eCom players must tread this path very carefully and try not to leapfrog- without proper back end.