admin
July 1, 2015
Vishal Krishna & Abraham C. Mathews, BusinessWorld
Bengaluru, 1 July 2015
This
scene repeats every day. Every morning, trucks loaded with crates
of unsold and damaged goods returned by e-commerce companies and
other retailers are brought to a 2,00,000 sq. ft. warehouse of
Reverse Logistics (RLC) at Tumkur Road in Karnataka. These goods
are then cleaned up, refurbished and then sold on RLC’s stores
and website greendust.com.
How much of e-commerce sales end up in warehouses? Hitendra Chaturvedi, founder and chief executive officer of GreenDust, says that it could even be upwards of 24 per cent as compared to the international norm of 12 per cent. Large eTail companies such as Flipkart, Snapdeal and Amazon are Chaturvedi’s clients. This is just a little glimpse of the back-end of India’s booming e-commerce industry. And the buzziest, within the sector, is eTailing, or the sale of goods over the Internet.
The e-commerce sector, though miniscule, is rising fast. So fast that all eyes are trained on it. According to a PricewaterhouseCoopers (PwC) 2015 report on e-commerce in India, the sector has grown by 34 per cent CAGR (compound annual growth rate) since 2009 to $16.4 billion in 2014, and is expected to touch $22 billion in 2015. eTailing, which comprises online retail and online marketplaces, is the fastest-growing e-commerce segment; it has grown at a CAGR of around 56 per cent between 2009 and 2014.
PwC
pegs the size of the eTail market at $6 billion in 2015 with books,
apparel, accessories and electronics constituting around 80 per
cent of product distribution and sales. Compared to India’s
huge retail industry, which is $550 billion according to Ernst
and Young, eTailing is miniscule and will only account for 3 per
cent of the trade by 2020. In comparison, the share of eTailing
in China today is 8-10 per cent of its retail economy. It’s
no wonder that though it is small today, eTailing in India is
seen as a goldmine of opportunities.
Despite deep discounting of goods and mounting losses, investors are still keen on investing in eTailing and e-commerce businesses. And so is the valuation of such ventures. Paytm sold a 25 per cent stake to Alibaba Holdings recently for $575 million, valuing the company at $2.4 billion. Broadsheet reports say Snapdeal is in talks with China’s electronic-parts maker Foxconn and Alibaba to sell a 10 per cent stake to them jointly for $500 million, valuing the eTailer at a mind-boggling $5 billion.
But there is something wrong. The simple logic of the rat race between Flipkart, Snapdeal and international competitor Amazon is this: Offering a spectrum of goods at the cheapest prices with easiest terms of delivery and returns to keep your customer base expanding at geometrical progression, and then leveraging the ‘customer real estate’ to get in the next set of investors. This money is used to offer higher discounts. And once the consumer is ‘ensnared’ to eTailing practices, prices will be restored to ‘normal’ levels, and you have a good business going.
What if the investments stop, and with them, the discounts. Plus, there’s a legal minefield lurking with respect to the country’s foreign direct investment (FDI) norms. So is it already a bubble waiting to burst?
Bitten Too Much
The last few years have spawned a variety of entrepreneurs, who plunged into this digital revolution. Both Flipkart and Snapdeal acquired about 10 companies in 12 months, spending $500 million.
Other marketplaces that have raised large sums of money are Urban Ladder, which raised $77 million (Rs 493 crore), Shopclues (Rs 746 crore) and BigBasket (Rs 278 crore). “It is still early days for the e-commerce industry, but the business is no doubt here to stay,” says Sanjeev Aggarwal, co-founder of Helion Ventures.
Unfortunately, acquiring consumers and weaning them away from the normal retailing practices have been expensive business for eTailers because they are compensating the seller for discounts. One estimate put the losses suffered by the big three as follows: Flipkart lost Rs 2.23 for every rupee earned; similarly the loss for Amazon was Rs 1.90, and for Snapdeal, it was Rs 1.72.
Data acquired by BW|Businessworld from Accounting and Corporate Regulatory Authority (ACRA), Singapore showed that Flipkart suffered a loss of Rs 1,028.9 crore on a turnover of Rs 2,937.7 crore in FY14. Losses had doubled from the year before. In FY13, Flipkart’s loss (before taxes) was Rs 544 crore on a turnover of Rs 1,163.1 crore (see Black Hole). Sources say Snapdeal had suffered losses worth Rs 530 crore in FY14. Meanwhile Flipkart, Amazon and Snapdeal together have spent Rs 9,774 crore on reverse logistics and discounting in the last financial year to acquire customers, as explained later.
Some believe that the online business models work because there are no rental costs. Remember what killed the organised retail boom in the previous decade? It was discounting and rental costs. Unfortunately, e-commerce has followed the same route today. Though most eTailers do not own physical stores, but Snapdeal, Amazon and Flipkart spend upwards of Rs 350 crore each every year on marketing and advertising to acquire the new real estate called the ‘consumer’. That apart, they are also paying rentals in maintaining warehouses. Last checked, each of the big three maintained at least 10 large warehouses at a huge rental cost.
The vast monies spent to acquire customers through deep discounting
remind us of the halcyon days of the brick-and-mortar retail boom
between 2003 and 2009. During that period, it is estimated that
upwards of $5 billion (Rs 30,000 crore) was pumped in by retailers.
Many of them, such as Provogue and Subhiksha, ultimately shut
shop because of high-operations cost that included rentals and
inventory cost. Others, such as Future Group and RPSG’s Spencer’s
Retail, kept afloat by restructuring and incurring heavy debt.
Flipkart, Snapdeal and Amazon did not respond to questions raised
by BW|Businessworld through email on the challenges they are facing
today.
For the fledgling e-commerce industry, it is probably a case of having bitten off too much, too soon. India promises a market of more than a billion customers; the industry hopes it is just a matter of time before the customer warms up to the idea of using smartphones to shop. Except, India isn’t really the homogenous stereotype as the marketing gurus like to think, where a huge customer base automatically translates into profits.
However, Sachin Bansal, co-founder of Flipkart, believes that the online platform creates so much data that cultural diversity is at the heart of the game. He says that technology, including data analytics, can change the way a region is being served with the help of real data collected from the browsing habits on phones. He is optimistic that the next step is going to be hyper local, and places more emphasis on the growth of mobile shopping.
Ghost Of Back-end Losses
What Sachin Bansal’s optimism hides is the fact that eTailers are paying big time for inventory on behalf of their associate distribution companies. These distribution companies are exclusive to each marketplace. Amazon works with CloudTail and Flipkart works with WS Retail. These companies generate 40 per cent of the deliveries for their eTailers. FDI rules (from 2010) state that not more than 25 per cent can be sourced from an associate company. The rule was scrupulously followed by the now defunct Bharti and Walmart partnership; but the same cannot be said of the eTailers. In the case of Bharti Retail, it sourced only 25 per cent from Walmart’s wholesale business in India — Best Price Cash and Carry.
The inventory costs for eTailers are the root cause of the losses along with discounts. Company sources say that today there is enough evidence of the losses, and it remains a permanent feature of this business. Retail is a cash-burning business and has the lowest margins, say about 4 per cent. Of the 195 million deliveries made, till FY14, by the big three eTailers, 23 per cent of the products were returned, with Rs 6,900 crore borne as the reverse logistics cost by these companies (see Shoddy Shipments and Bleeding Profusely). About 35 to 40 per cent of the total returns were from associate distribution companies, and the rest were from registered sellers. Inventory is maintained for distribution companies and this amounted to Rs 2,462 crore. Two reputed brand heads of big marketers — Puma and Samsung — preferring anonymity told BW|Businessworld that their contracts with Flipkart, Amazon and Snapdeal included a limited return clause. That is, if customers returned products for whatever reason, the vendor will accept only 5 per cent of the returns. The eTailers take the risk for returns above that level.
Now for discounts: an average of 20 per cent is borne by these three e-commerce giants; they pay sellers to make good on discounts. This number rounded up to Rs 7,312 crore in FY14. Now add the returns cost of Rs 2,462 crore to the cost of maintaining discounts at Rs 7,312 crore, and this totals to a whopping Rs 9,774 crore as their losses only from discounting and reverse logistics. Everyone would be happy if new and existing investors keep the money coming and the discounts flowing for the next 15 years. But is that realistic?
Regulatory Warning Signals
There are warning signals. In May, minister of state for commerce and industry Nirmala Sitharaman told the eTail industry that relaxing of FDI rules will not happen till the government’s ‘Make In India’ campaign spurs domestic manufacturing. FDI rules currently put the onus on states to permit foreign investors in retail outlets that sell multiple brands. Most states have so far resisted.
Thus, Amazon is a marketplace in India. However, according to its submissions during a hearing before the Authority of Advance Rulings for Indirect Taxes, in 2012, Amazon said it would provide two types of services in India: A front-end online platform to facilitate merchants, and the second would be to provide logistics support in relation to the goods sold by the merchants. The details are where things get murky. The order at warehouse: Amazon unbundles wholesale packages into individual retail packages, sometimes sorting the packages if the wholesale package includes different items. It then wraps them with required protective material, and bundles products when two or more items are to be sold together. Arguably, going by this, Amazon is more than just a neutral platform. It takes up a much more active role in the sale procedure. Logistics is not limited by the FDI rules, but when combined with the online platform, like a shop-in-shop, for multiple vendors and moving the product through warehouses, it replicates a Central or a Shoppers Stop.
This muddies the companies’ usual rhetoric about being just a marketplace. The point is if there’s ‘transfer of risks and rewards’. R.Muralidharan, senior director for Indirect taxes at Deloitte, says: “If only the companies have contracts that oblige them to take ownership of goods at any point, then it will be difficult to argue that risks and rewards have not been transferred.” Once that is established, tax implications would change and they would fall foul of FDI rules. The Enforcement Directorate has been investigating Flipkart for similar violations since 2012, for its relationship with WS Retail, which sells more than a third of its products. WS Retail was sold to private investors to alienate the ownership from Flipkart’s management. How independent is it really?
“Regulators will ask e-commerce companies to come out with a clear idea of their business; whether they are a technology company, a market place, or a logistics business,” says Ganesh Prasad, partner at law firm Khaitan and Co. He says regulators will go after the tax liability of these companies and not valuations. “Things like the origin of the product and where, in which state, should the tax be collected will need clarity,” adds Prasad.
And then, there is lobbying by brick-and-mortar businesses for a level playing field for raising foreign money. “The current protectionist policies are leading to an imbalance in the market, as the players exploit the gaps in government policies,” says Vikas Agarwal, general manager (India), One Plus, a Chinese electronics company.
Defending these eTailing practices, Sachin Bansal of Flipkart, said on the side lines of a press conference: “The business has seen phenomenal growth. The capital raised, so far is being used to better technology and offer the best to the customer.” Bansal’s counterpart at Snapdeal, Kunal Bahl, agrees with him on the growth of the business. “The younger generation’s propensity to shop online is clear, for the future, and smartphones are a great way to engage with them.” But both agree that regulation was something that all e-commerce companies had to cope with and were struggling to seek clarity in the long-run.
The tax issue too is being debated vehemently by the state of Karnataka. Last year, local tax authorities stopped sellers from trading, especially Amazon, from warehouses operated and managed by eTailers. The tax authorities’ case was that eTailers should collect tax on behalf of sellers. The eTailing companies, on the other hand, did not want to follow such direction because it would bring them in direct conflict with FDI regulations, which does not allow multi-brand retailing. The status quo continues to this day with no settlement in sight.
Long-term Value
Regulatory hassles have not dissuaded investors. In fact, there is a glut of foreign money chasing a few e-tailers. The Russians (DST Global), the Americans (Tiger Global), the Japanese (Softbank), and the Chinese (Alibaba) are on the prowl. Every acquisition has been at an eye-popping valuation. So far, Rs 9,774 crore has been spent on servicing 36 million regular consumers, and the industry will need a further Rs 27,000 crore to acquire 100 million regular customers by 2018. The target for the VCs has always been the number of consumers their ‘investee’ companies can acquire and not the number of sellers who came on board. Flipkart, Amazon and Snapdeal have only 10 per cent of their total 1,00,000 registered sellers, as regular merchants.
“It is quite possible that the liquidity in the global funds, and the promise of the Indian eTail story is driving the prices up to unreasonable levels,” says Aviral Jain of valuation firm American Appraisal, a division of Duff & Phelps. “The premise of e-commerce valuations in the US is customer loyalty, says Jain. In India, however, the challenge is that the loyalty is absent and survival until consolidation is the key, he says. In India we are loyal to prices, thus making discounts de rigueur.
With extensive experience in e-commerce industry and related investments, Shinoj Koshy, partner, Luthra & Luthra, says: “E-commerce players are not in the business of handing out discounts. What they are interested in is altering consumer behaviour by weaning customers from traditional brick-and-mortar outlets. Once a habit has been formed, then discounts will get rationalised and services are likely to come at cost. An indication of what is to come is paid services at Flipkart First and Amazon Prime.”
Investors’ Waiting Game
“That the customer is going online is true. But like any retail business, it requires capital to sustain operations,” says Vinay Parekh, CFO and co-founder of BigBasket.com. He says the industry needs long-term capital to build trust with consumers and offer the best services. Big Basket delivers grocery in six cities to 20 million customers every year. Perhaps, they are the only ones who have not spent heavily on acquiring customers. Paytm, which has harboured an ambition of making it big in eTail, plans to bring on board a hundred thousand sellers by end of the year, and bring in one million Chinese sellers.
“These goods, ordered on our app or website go to our delivery centres and do not remain in there for long,” says Amit Lakhotia, general manager of Paytm wallet. He adds the opportunity to bring Alibaba’s merchants was enormous and could supplement the revenues garnered from the online wallet business. Logically, everyone is betting on the fickle smartphone user. However, the average Indian (600 million Indians under age 40) is still not using the smartphone for regular transactions.
Not being able to acquire customers is beginning to glow in the darkness. These companies do not generate cash from operations, which is the lifeline of a company. The accounts filings with the Registrar of Companies, in India, show serious losses. The trio of Flipkart, Amazon India and Snapdeal posted losses totalling Rs 1,300 crore (Amazon Rs 320 crore, Snapdeal Rs 264 crore and Flipkart Rs 716 crore) in 2013-14. Can one of the three rivals afford to turn off the discount tap without losing their market share?
On
the other hand, a synchronised move to do away with discounts,
when they have a firm control of the market, is sure to earn the
censure of the Competition Commission of India.
Will Investors Stay?
The eTailers are at the mercy of investors who have different timelines for closing their funds. Most of them will begin exiting by 2018 and the top two Indian eTailers must create a sustainable business by then. The total share capital of Flipkart was $3.2 billion (Rs 20,000 crore) and it has already eroded by Rs 10,288 crore. Flipkart has not been generating cash from its operations and its negative cash flow stands at Rs 592 crore. Similarly, Snapdeal too has not been generating cash, and carries on its shoulders a negative cash flow of Rs 300 crore on the Rs 6,000 crore it has raised so far.
When fresh money stops coming, do these home grown eTailers have the fundamentals to remain afloat? Or will they become victims of a fire sale by investors offloading to private equity funds, who usually take long-term bets. Private equity seems to be the only option. Flipkart registered in Singapore has 148 investors. Many of them are pension funds of Xerox Corp, ConAgra, Rio Tinto and Shell. Seeing Flipkart’s downward spiral, how long will they wait before exiting?
Sanchit Vir Gogia, CEO of Greyhound Knowledge Group, says most investments were made between 2013 and 2014; so funds may want to exit before 2018-19, since VC fund cycles last only for five years. Institutional investors look for an exit by either selling back to the promoter, or to another investor or to the public through an initial public offering (IPO). An Indian IPO looks remote when there are no profits on the horizon. Making new investors pay more than the current valuation could be a tough ask.
That is when things get tricky.
Devangshu Dutta, CEO of Third Eyesight, a retail consultancy, says that these businesses, like any retail business, will not make money in the short run, but like steel or infrastructure businesses, these would take a 15-year cycle to make money.
India’s home grown eTail companies are expectedly worried because by committing $2 billion to their India foray, Amazon has neutralised the advantage Flipkart built over the last five years. Today, they compete as equals.
There are the long-term hopefuls. “Global investors will back these companies, and will bailout existing funds, because India is the largest consumption market,” says Ganesh Prasad of Khaitan and Company. The investors may lead yet another large round of funding, he says.
“When you have the money, raise funds,” says Aviral
Jain of American Appraisal. But what if your business model itself
is flawed? Then the next round of funding becomes difficult. One
will have to wait and see if the investors blink. Warren Buffett
put it thus: “Only when the tide goes out, do you discover
who has been swimming naked.”
(Published in Businessworld issue dated 13 July 2015.)
admin
June 26, 2015
Richa
Maheshwari & Sagar Malviya, The Economic Times
Bengaluru/Mumbai,
26 June 2015
A
nondescript three storey building at Whitefield — the hotbed
of tech companies in Bengaluru — where a team of around 100
people including 35 engineers talk more about cloud technology
and analytics than catwalks and advertising, is not a place one
would identify with a fashion powerhouse like Madura Fashion &
Lifestyle.
Yet this is where the country’s largest apparel retailer has its next big growth driver: Trendin.com, its online division. Within a year of its launch, sales of Trendin have equalled those of 30 branded stores, or close to 1% of Madura’s turnover.
In fact, Kumar Mangalam Birla’s fashion flagship claims that Trendin — run by a completely independent management team and having dedicated warehouses and partnership with many tech startups — is the largest online portal of any brick-and-mortar retailer in the country.
"The engineering team of Trendin has built the platform, which is unlike any other brick-and-mortar company setting up ecommerce," said Shivanandan Pare, head of e-commerce at Madura, which has over half a dozen marquee brands including Louis Philippe, Van Heusen and Allen Solly. He said that unlike its peers Madura’s Trendin has built its technology in house.
"This gives us extreme flexibility and agility." Before joining Madura, Pare, 41, was instrumental in turning around Reliance’s BigAdda by changing the social networking site into a commerce venture five years ago. The stakes are much higher now as there are strong rivals including Flipkart and Amazon in the online space and his merchandise spread is limited to own brands.
"The mandate is clear — Trendin should be Madura consumers’ first choice online. We have the widest range of merchandise available compared to online marketplaces and even our own stores," said Pare, an engineer and management graduate.
After sudden market share gains by online players, strategies of several traditional retailers including Reliance, Tatas and Future Group now revolve around omni-channel retail, which requires IT systems and processes to support customers shopping both in stores and online.
For Birlas, it is no different. Devangshu Dutta, chief executive officer at retail consultancy Third Eyesight, said Trendin’s big challenge is to attract enough customers to its site.
"The online market, in the last there years, was driven by discounting. Such a [blended business] platform has an inherent strength of product mix and service, which is now becoming important," he said.
"Trendin is driving customer acquisition online which can also work vice-versa but the real challenge is whether they can build enough traffic." Trendin is only a fraction of Flipkart or Amazon in terms of sales, but it is also helping Madura’s offline sales by sharing consumer insights.
For instance, search queries on Trendin get shared with Madura’s merchandising team to help forecast demand better. So what’s moving online faster is stocked at stores too.
Just like his daily six-kilometer commute for office on his bicycle,
Pare has been hitting the pedals hard on partnerships – from involving
startups such as Infinite Analytics and Cloud2scale to roping
in FedEx, Ecom Express and India Post for delivery of products.
The company’s dedicated 60,000 square feet warehouse comes handy
too.
(Published in The Economic Times.)
admin
June 19, 2015
Writankar
Mukherjee & Sagar Malviya, The Economic Times
Kolkata/Mumbai,
19 Jun 2015
The
Tata Group will launch the country’s first hybrid online retailing
venture, a combination of a portal that will list brands and handle
payment transactions and brick-and-mortar stores that will set
prices, deliver products and provide customer support.
Group firm Tata Industrial Services, which changed its name to Tata Unistore Ltd, will spearhead the venture that’s likely to be piloted before the Diwali shopping season. The venture’s brand name is yet to be finalised.
The salt-to-software conglomerate is in advanced talks with top brands across categories to complete the integration with their offline stores, with major focus on smartphones, consumer electronics and fashion, which account for 80% of e-commerce sales in India, said five senior executives, two of whom are attached with the group. Even in rural areas, orders will be dispatched by designated offline stores.
"The Tata e-commerce venture will act as a frontline sales hook for offline stores and will play on customer experience, assured aftersales support and wide reach. It is expected to drive sales of high-ticket items whose online sales are still limited," one of the Tata group executives said.
A Tata Group spokesperson said, "Indeed e-commerce is of interest to the Tata Group. We will share more information at the appropriate moment."
Unlike online entities Flipkart and Amazon, which push sales through deep-discounts, Tata’s venture will not indulge in price wars. Discounts will be decided by the brands and won’t vary much from their in-store promotions. Unistore officials have informed brands they should not sell below the price at which they sell to retailers.
"The integration of the brand’s offline stores will mean there will be no conflict among the trade partners at all," the Tata executive said.
"Online with an offline plug does make a difference and their model looks sustainable and legitimate," said Devangshu Dutta, chief executive officer at retail consultancy Third Eyesight. "Discounting isn’t a sustainable model and many players have started to realise the pitfalls of attracting consumers just through pricing."
The venture will ensure complete warranty and after-sales support for categories such as smartphones, televisions and appliances, a stark difference from products sold online that don’t always come with such benefits. For categories like apparel, customers will be able to exchange the product, pick the correct size or return it at the nearest offline store.
While Tata Unistore officials have tried cutting exclusive deals with leading brands such as Apple, Samsung, Sony and LG, it remains iffy. "Instead, the brands are ready to offer exclusive models," an official said.
The country’s e-commerce market is expected to quadruple to $60-70 billion in the next five years, according to the Boston Consulting Group and the Retailers Association of India, boosted by increasing Internet access through affordable smartphones and efforts by online retailers to develop payment channels such as cash on delivery, mobile wallets and streamlined logistics infrastructure.
Brick-and-mortar companies including Future Group, Reliance and the Aditya Birla Group are planning online retail initiatives across product categories to take advantage of the increasing adoption of e-commerce.
Tata’s venture will have a separate section for group brands such as Voltas, Westside and Titan, while the online stores of its companies like Croma will continue as separate entities. As part of the plan, the new venture bought Landmark E-retail Ltd from group company Trent for Rs 14 crore.
(Published in Financial Express.)
admin
June 18, 2015
Shambhavi
Anand, The Economic Times
New
Delhi, 18 June 2015
The
country’s food regulator plans to soon put the onus on retailers
to check for product approvals and could hold them responsible
if they are found selling items that have not been approved by
it.
The Food Safety and Standards Authority of India (FSSAI), which has been at the centre of the recent crackdown on Nestle’s Maggi noodles and several other brands, is working on an advisory that will make clear the responsibilities of retailers, its head told ET. This will be a drastic move that will make retailers responsible for the products they stock and could render them vulnerable to regulatory and legal action in the event of anything going wrong.
"The retailers should also be responsible for what they are selling to the consumers. They should at least check for food approvals," said Yudhvir Singh Malik, chief executive of FSSAI.
Malik said it was often found that many retailers sold unapproved items for higher margins, but when confronted and challenged by food inspectors, most of them pleaded ignorance. The Maggi case first came to light after a food inspector in Barabanki, Uttar Pradesh picked up random samples of the popular noodle brand from an organised retailer and tests on it showed that it contained high levels of lead and monosodium glutamate. When the authorities sought to hold the retailer responsible, it said the item was not manufactured by it and it could not be held responsible.
While Nestle’s Maggi noodles has been taken off the shelves by almost all retailers following the controversy, many products that do not carry FSSAI approvals and have in fact been banned by it continue to adorn store shelves. The FSSAI banned some 500 products recently which include some 32 products from Tata Starbucks, cereal from Kellogg’s, poultry products from Venky’s, Hindustan Unilever’s Knorr instant noodles and a multivitamin from Ranbaxy.
While retailers declined to comment on the FSSAI’s proposed move saying they wanted to study it before reacting to it, analysts said putting the onus on the retail trade would pose several challenges in a country with nearly 8.8 million stores.
"Until now the burden of compliance lies only with the brand owner or manufacturer. But if the regulator wants to split the responsibility of compliance, execution will be a challenge. While it will not be an issue for modern retailers, who have the resources to read rule books and execute such rules, kirana shops and mom-and-pop stores may not be able to do so," said Devangshu Dutta of Third Eyesight, a retail consulting firm.
The head of a leading supermarket chain said for what the regulator is proposing to work, timely and regular communication from it would be key.
"Removing the product is a simple step but knowing which ones is tricky unless we get regular communication from FSSAI," said this person, requesting anonymity.
In the aftermath of the Maggi controversy, the food regulator
has ordered testing of instant noodles, pasta and macaroni brands
of seven companies including ITC, GSK Consumer Healthcare (GSKCH)
and Nestle India, and declared brands made by all other companies
as unapproved.
(Published in The Economic Times.)
admin
June 18, 2015
Sharleen
D’Souza, Financial Express
Mumbai,
18 June 2015
Fashion
and lifestyle e-tailer Myntra is understood to have seen a drop
in sales after going app-only last month, say market watchers.
“Myntra had anticipated some reaction to going app-only and
had factored in a drop in sales,” said a source in the know.
However, the etailer has no immediate plans to revive the website.
A company spokesperson said: “We have just completed a month since we went app-only and hence are not ready to talk about the overall performance yet. We will however come back to you the moment we have something to share.”
The spokesperson added: “For your understanding, we will not be moving back to the desktop as our focus is 100% on the app. You will also see regular app updates with a lot of social features being introduced.”
Devangshu Dutta, chief executive at Third Eyesight, a retail consultancy firm, said the ease of shopping on a desktop makes a customer buy higher value compared to that on an app. “This could have caused Myntra’s sales to decline so drastically,” Dutta observed.
When the e-commerce fashion retailer decided to go app-only on May 15, it took into account the increase in smartphone sales to 600-700 million by 2020 from 120-140 million in 2014, which will help create a base for creating an inclusive market in the history of fashion shopping. “According to a recent study, 90% of smartphone users in India use apps, which is close to 158 million as of today. The country ranks second only to the US in the usage of shopping apps,” the company had said in a press release.
While going app-only, Myntra had said it saw close to 95% internet traffic from mobile devices and 70% sales from mobile devices. At that point, Myntra had 9 million app downloads and it targeted another 5 million downloads in the next 4-5 months.
(Published in Financial Express.)
