Written By Sagar Malviya & Shambhavi Anand, ET Bureau
MUMBAI/NEW DELHI: About two months ago, Future Group founder Kishore Biyani visited China to understand shopping behaviour during Singles Day, the biggest shopping festival in the world’s most populous country.
Biyani was part of the star-studded event that Jack Ma, the founder of Chinese e-commerce giant Alibaba hosted in Shanghai and included guests such as actress Nicole Kidman, singer Pharrell Williams and local celebs for its Singles’ Day sales extravaganza. The next day, Alibaba saw its sales hit new record of $25.3 billion.
Biyani wants to mimic that in India. “While we have launched the Republic day sale more than a decade ago, we have taken inspirations such as bringing celebs for live gaming show on Facebook and opening pop-up stores from Alibaba. The idea is to blend online shopping with offline stores, or O2O, which already accounts for 10% of our sales,” said Biyani, adding that he is targeting sales of over Rs 1,000 crore from the five-day mega discount event during the Republic Day week.
What started as a day-long sale occasion on the 26th of January back in 2006 has become a serious revenue generator for the Future Group, generating roughly 5-7% of its annual sales. The first year also saw a crowd frenzy which forced the company to call the police in to manage the situation.
This year, the retailer will also open Big Bazaar pop-up stores in about 50 cities and localities where it is not present and sell pre-book fast billing pass ahead of the event. Top ecommerce companies such as Amazon India and Flipkart are offering deep discounts in the first online sales event of the year starting Monday.
“When a company talks only about discounts, people will just look for deals. But when discount is combined with excitement and entertainment, it contributes to the sale event. This (Bigbazaar event) will lift it above just a discount mechanism,” said Devangshu Dutta, CEO at Third Eyesight.
Future Group said it plans to reach nearly 30 million customers mainly through a 24-hour live entertainment show on Facebook where about two dozen celebs will participate. It will also announce hourly exclusive offers and coupons to drive store walk-ins.
“The line between online and offline shopping is blurring in today’s retail environment. We are increasingly seeing live videos become an important medium for brands to interact with their consumers. “Sabse Sasta Din” campaign, will be one of the first 24-hour Facebook Live, making it a much bigger campaign this year,” said Pulkit Trivedi, director, Facebook India.
Over the years, brick-and mortar retailers have been investing in omni-channel strategies and experimenting with global models such as flash sales.
Written By Alnoor M Peermohamed
The move could mean that many startups would have major tax liabilities as the money they spend on marketing activities will no longer be considered a cost to the company
Consumer technology startups that spend a lot of money on buying customers through discounts and advertising could be in for a rude shock as the Income Tax department could ask them to begin classifying their marketing expenses as capital expenditure.
The move could mean that many startups would have major tax liabilities as the money they spend on marketing activities will no longer be considered a cost to the company. Right now, most consumer tech startups report this expenditure under marketing expenses that are deducted from their revenues, causing them to post losses.
The Economic Times first reported on Monday that Flipkart had lost an appeal against the IT department over the reclassification of marketing expenses and discounting as capital expenditure. The report stated that the IT department’s move could affect all large e-commerce firms in the country as well as startups.
“It’s a significant liability. If the tax department’s stance is taken, essentially marketing and discounting is an investment that goes into building a business and is not an operational cost.
If this happens it is quite likely that e-commerce companies would begin to show some form of profits on their bottom line,” said Devangshu Dutta, Chief Executive at Third Eyesight.
While the extent of tax liabilities will depend on how much a company is spending on marketing and discounting, firms which are operationally profitable could be taxed. Dutta says that in the case of e-commerce firms in India, the amount being spent on marketing could be anywhere between 40 to 60 percent of their revenues.
Flipkart’s main argument against marketing expenditure and discounts being classified as capital expenditure has been that there is no enduring benefit from the money they are spending. For instance, money spent on television advertising does not have any enduring benefits for Flipkart, making it a revenue expenditure and not capital expenditure.
“It’s going to get hard to differentiate between whether an expenditure made by the company is an enduring expenditure or not. It has to withstand the scrutiny of the court as well in the coming days, but this is going to be a significant issue,” said a legal expert from a reputed law firm who did not want to be named.
He added that if the IT department initiates such a kind of litigation it will have a marked implication on the industry as a whole and not just e-commerce giants such as Flipkart. The major contention of the hearing in the court will be to define what are the attributes of an expenditure to be classified as capital expenditure.
Softbank, the single largest investor in Didi Chuxing in China, Ola in India and Grab in Southeast Asia, has backed local players for growth over Uber in each of these markets
Written By Karan Choudhury & Alnoor Peermohamed
A comment made by Rajeev Misra, a board member of Softbank and about to join the Uber board, triggered a strong buzz on Friday that the Travis Kalanick-founded ride hailing firm may step off the pedal in India. Talks of a possible merger between Ola and Uber, with Softbank as the common investor, also did the rounds.
With the formal closing of the $9.3-billion investment, Japanese tech conglomerate Softbank has become the largest shareholder of Uber.
Misra told the Financial Times that Uber would have a faster path to profitability if it returned to its core markets such as the US, Europe, Latin America and Australia. ‘’This is a growth company, this is not just about them cutting their losses,” he said. “Who cares if they lost a billion more or half a billion less?”
Softbank is the single largest investor in Didi Chuxing in China, Ola in India and Grab in Southeast Asia. In each of these markets, Softbank has backed local players for growth over Uber. In fact, Softbank is learnt to be in talks to buy Tiger Global’s stake in Ola.
An Uber India spokesperson dismissed any talk of a merger between Ola and Uber as a baseless speculation. “Our business in India is stronger than ever and we are 100 per cent committed to serving our riders and driver partners in India”, the spokesperson said in a statement. Ola refused to comment on competition.
Uber’s shift to its main markets is likely to reduce the fight with Ola in India that has seen billions of dollars thrown on incentives and discounts to woo drivers and customers on to their respective platforms.
However, over the last one year, both firms have tactically cut incentives and discounts. Yet they are still burning cash.
Bhavish Agarwal, co-founder of Ola, is expected to raise big-ticket funds, estimated around $1 billion more, for expansion as well as newer growth initiatives such as electric vehicles, autos and bicycles.
Ola has projected 2019 as the year to turn profitable. It’s targeting to generate cash profits of over $1 billion by 2021.
It is still not clear whether Softbank would pursue a merger between Ola and Uber, similar to how the dominant Didi Chuxing acquired local stake of Uber in China with a minority stake to the US company. If there is a merger, it could also attract the attention of the Competition Commission of India.
Ola claims market leadership with presence in over 110 cities, covering around two million rides a day, while Uber with presence in 25 cities does around one million daily rides, according to estimates.
Analysts say that India’s taxi sector is seeing a pusback from traditional operators. With lower yields in India, it makes sense for Uber to focus on its higher revenue market, they say.
“To improve financial metrics, it makes sense for Uber to focus on Europe and the US, where the revenue per trip is higher. There is resistance from fleet taxis which believe that Ola and Uber are eating into their business. Those operators are demanding that the ride hailing business should also be included in the regulation,” says Devangshu Dutta, chief executive of Third Eyesight, a consultancy.
“If ride hailing services need to undertake the same level of compliances that fleet taxis do, Uber will find it difficult to make money in a competitive market where yields are low,” he said.
Karnataka, which is among the largest ride hailing markets in India, has brought in a regulation that has fixed minimum and maximum ride hailing fares based on the value of the vehicle, to ensure that drivers are adequately compensated and does not disrupt the traditional taxi market.
More to leverage consumers’ spending abilities, existing dealer network
A sanitaryware company is now selling kitchen cooktops and chimneys.
A water purifier brand has launched noodle maker, juicer and bread-making appliances.