Manu Kaushik and Arpita Mukherjee, Business Today
New Delhi, 23 November 2014
Ahmedabad-based Anish Nagpal has been selling products online
since December 2011. He sells clothing, footwear and home decor
under his own brands, Cenizas and Macoro.
In October, as festival buying peaked, Nagpal’s company cashed
in by selling over 80,000 items, much higher than the average
of some 50,000 in other months. However, around 90 per cent of
his sales, in terms of the number of items, were on Flipkart and
Snapdeal, the two big e-commerce rivals which, fattened with funding,
have unleashed high-decibel advertising campaigns.
The others – Naaptol, ShopClues, HomeShop18, Limeroad and Indiatimes
– where, too, Nagpal peddles his wares, brought in little more
"Large e-commerce sites generate more traffic and therefore
we tend to focus more on them," says Nagpal. On October 6
alone, Flipkart’s Big Billion Day, a discount carnival intended
as a tribute to the flat number 610 in which Sachin and Binny
Bansal set up the company in 2007, Nagpal sold 11,000 items on
Nagpal, who has nearly 15,000 product varieties and an online
stock of 1.5 lakh products, says that even in terms of listings
and catalogue he is biased towards large players. "At the
end of the day, I have limited inventory and bandwidth. I will
put my efforts behind the big names."
He is not the only one to think like that. In January this year,
electrical equipment maker Havells India started selling its 700
products online through tie-ups with Amazon, Naaptol, Pepperfry
and Indiatimes. The company quickly realised that the large ones,
with their scale, gave more for less. In October, Havells sold
3,000 pieces to these websites out of which 2,500 went to Amazon
India. "We have just started selling online and we are still
testing this channel. A bigger e-commerce company can help us
in understanding the market better," says a Havells spokesperson.
Likewise, consumers, too, are moving towards the biggies. In
Pune, 28-year-old Mohua Mandal was shocked out of her wits when
her father’s customary Diwali gift this year, a saree, was delivered
to her by Flipkart. Kolkata-based Santosh, Mohua’s father, found
it the most convenient way. The choice was vast and the discount
deep. And there would be no need for him to find a courier to
carry the saree from Kolkata to Pune.
Santosh, a retired railways professional, is hardly the kind
that listens to punk rock on headphones and makes online purchases
in coffee shops. But the sustained advertising blitzkrieg by the
big e-commerce players first made him curious and then a convert.
"There was a tangible decline in footfall and transaction
[in malls and offline stores], which was attributed by retailers
to the whole e-commerce shebang," says Devangshu Dutta, CEO
of consulting firm Third Eyesight.
According to industry body Gartner, the e-commerce market stands
at $3.5 billion, which is expected to reach $6 billion in 2015,
a 71 per cent growth.
Experts attribute the growth this year to the publicity around
the growing e-commerce market, deep discounts and the ease of
purchase. This, along with a one-upmanship battle raging between
the big guys – Flipkart, Snapdeal and Amazon – a lot more willing
customers are joining the online consumer base.
However, this growth is hardly even. The likes of Flipkart, Snapdeal,
Amazon and eBay are taking away the lion’s share of it. Small
and niche e-commerce firms such as Infibeam, Naaptol, Tradus,
and a plethora of others, seem to have lost ground due to inadequate
eTailing India estimates suggest that the pie this festive season
was gobbled up mostly by Flipkart, Amazon, Snapdeal and eBay.
While there are no official estimates, the Big Four have together
cornered 70 per cent of the e-tailing market, averaging out the
sales during the festive and non-festive seasons.
Starting with the Big Billion Sale on October 6, when it sold
products worth $100 million in 10 hours and saw a billion hits
on the website, Flipkart had a dream run in the month. If traffic
is a good proxy to measure sales, Flipkart was far ahead of the
others on that day. However, according to Internet agency SimilarWeb,
there were 16.4 million visits on Flipkart on October 6. For smaller
ones like Homeshop18 and Lenskart, the numbers were merely 543,056
Throughout October, Flipkart had an average daily traffic of
10 million, compared with six million in the month before. Its
October revenue stood at around $400 million, while Snapdeal clocked
some $120 million, according to Spire Research and Consulting.
Smaller players registered far lower revenues.
Sandeep Sharma, Co-founder and Chief Operating Officer of niche
e-commerce portal Yepme.com, accepts that the large players are
hogging the limelight. "I think smaller e-commerce players
have been overshadowed by the bigger players. Companies such as
FashionAndYou, Lenskart, Fashionara and ShopClues don’t have the
kind of money that big e-commerce sites have raised or have committed
for expansion. Big players have deep pockets which smaller companies
Yepme sells its products on its own website (Yepme.com) as well
as other large e-commerce portals such as Flipkart-Myntra and
Snapdeal. The buzz created by large players resulted in Yepme
clocking higher sales growth on other portals as compared to its
own website in October. "The sales growth on other websites
was 100 per cent in October, whereas the growth on our own website
was just 50 per cent," says Sharma.
Other small outfits disagree with him. Naaptol, Homeshop18, Mydala
and Infibeam say they, too, have grown well. Mydala claims its
sales rose 60 per cent during the festive season. "We are
not spending anything close to what they are spending," says
its Co-founder and Chief Technology Officer, Ashish Bhatnagar.
"We cannot make that big marketing push. Not just because
they have deep pockets but also because we do not believe this
will give us return on investment."
Homeshop18 says it wouldn’t be squeezed by the march of the e-commerce
biggies because most of its revenues come from television. "The
web audience is evolved and can do its own online research. Television
audience is different; you need to hold their hand," says
Vikrant Khanna, Chief Operating Officer, TV Business, Homeshop18.
The smaller firms also say that profitability is supreme for
them. Infibeam Founder and CEO Vishal Mehta says size is important,
but so is profitability. "Those who have the largest market
shares will not necessarily be the last men standing." Infibeam,
he says, broke even last year and expects profits this year.
The small outfits say they benefit from the rub-off of the advertising
campaigns of the big players. "We see huge traffic whenever
big players advertise," says Sanjay Sethi, Co-founder and
CEO, ShopClues.com, an online marketplace.
Advertising spends by e-commerce players this festive season
in the week leading up to Diwali were 40 to 60 per cent higher,
says ad retargeting company Vizury. Take the case of Snapdeal.
A 10-second spot on Sony’s game show KBC costs around Rs 6 lakh,
and Snapdeal has gone in for an in-show integration, with a Snapdeal-branded
question, for which it would be paying a premium of 25 to 30 per
ShopClues, with much less money to play with, decided to stay
away from the print and TV advertising frenzy. As compared to
around nine to 12 per cent of the top line for large players,
ShopClues spent around 6.5 per cent on marketing in the festive
season. It confined itself to a small awareness campaign.
Gaurav Gupta, Senior Director, Deloitte India, says the smaller
players will continue to get squeezed. "It requires a large
amount of capabilities to become a large player: building brand,
product catalogue, offering competitive prices, and customer experience.
In all these areas, large players clearly have an advantage."
Experts believe in specific categories such as fashion, those
other than Jabong and Myntra clearly lost out on the discounts
The small players, many of which thrive in niche segments, will
face more heat because the big ones have followed them there.
Flipkart acquired Myntra this year to widen its apparel offerings.
Snapdeal sells furniture, an area that was so far the domain of
mainly FabFurnish and Pepperfry.
However, FabFurnish Co-founder Vikram Chopra is unfazed. "The
experience that players like us can offer is unmatched. You need
specialised experience in running a furniture business online.
Walmart sells furniture in its store, but people still go to Ikea."
That they do, but the moneybags have veered largely towards the
big e-commerce players in India. With the recent round of investment
of $627 million from Japan-based SoftBank, which it announced
on October 28, Snapdeal has now raised about $1 billion from investors
such as Temasek, Myriad, Tybourne, and Blackrock.
Flipkart has also raised substantial sums from investors such
as Tiger Global, Accel Partners and Morgan Stanley. Then there
are the Indian arms of the global biggies Amazon and eBay.
Experts say that e-commerce in India is in a habit forming stage
and money will have to flow – in advertising and discounts – to
lure more consumers, and bring them online more frequently. That
is why investors do not mind punting on the promising ones like
Flipkart, which many have taken to calling India’s Amazon, and
Snapdeal, its close rival.
The question is, for how long will they continue to pump in money without worrying about profits? For the smaller ones, it is the opposite: how long will they make do with claims of profitability, without worrying about funding?
Additional reporting by Arunima Mishra and Taslima Khan.
(Published in Business Today)