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February 14, 2019
Written By Sagar Malviya, ET Bureau
The Japanese-owned, US-headquartered 7-Eleven generates nearly a third of its sales in the Asian country. The Future Group’s latest move will be pitched against round-the clock convenience store chain Twenty Four Seven, promoted by Modi Enterprises and In & Out, which is run by state-owned Bharat Petroleum Corp Ltd.
Seven & i Group and Future Group didn’t respond to queries.
“Future Group has a number of neighbourhood stores through their own format launches and through acquisitions. Some of them could surely be repurposed to 7-Eleven convenience stores, while there could be other franchisees appointed for specific sites or territories,” said Devangshu Dutta, chief executive at consultancy firm Third Eyesight. “However, becoming a franchisee entails costs and restrictions. The question is whether there is enough margin available in the business to allow for so many tiers of stakeholders.”
A partnership between the two will help Future Group reach out to buyers beyond their own outlets in the modern trade segment, analysts said.
Future Group, which runs 1,444 stores in 409 cities, generates most of its revenue from food and grocery retailing. It has three smaller store brands — Easy Day, Heritage Retail, and Nilgiri’s — that have been acquired in the past few years and contribute 15% to sales. A recent report by Antique Broking expects Future Group’s small-store business to breakeven at an Ebidta (earnings before interest, taxes, depreciation, and amortisation) level by the end of FY19. A year ago, like 7-Eleven to the mix will make the group more attractive to prospective investors, an analyst said.
“Future Retail has always maintained it is FDI (foreign direct investment) compliant, which essentially means they are looking to sell stakes. A portfolio of retail brands including an international chain brings more heft to the company so that it attracts invest-Trent Hypermarket, a joint venture between the Tata Group and Tesco exited its small store business that operated under the Star Daily brand.
Adding a brand name ments from global retailer. However, investors are also being cautious now due to changing regulation in the retail sector,” said Abneesh Roy, senior vice president, institutional equities, Edelweiss Securities.
Globally, corner shops including 7-Eleven in Japan, Taiwan, Thailand and Singapore, Lawson in Japan and Oxxo in Mexico are among the largest retailers in their respective markets, reflecting the growing business of small outlets in several countries despite the presence of international supermarket and hypermarket chains. Since 2012, most of the large grocery retailers in the country have reduced store sizes by 13-35% to drive more profit through higher revenue per square feet.
In India, smaller stores or kiranas still account for nearly 90% of the all consumer products sales. Future Consumer, which sells its own brands of snacks, cookies and other packaged foods at its Big Bazaar stores, gets about a quarter of its sales from about 120,000 general stores.
Source: economictimes
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February 11, 2019
Written By Deepti Govind
P.C. Musthafa, CEO, iD Fresh Food India Pvt. Ltd. (Jithendra M/ Mint)
BENGALURU : Azim Premji-funded iD Fresh Food India Pvt. Ltd has an ambitious plan. The company’s founder and chief executive, P.C. Musthafa, believes his newly-launched coffee decoction business has the potential to grow to ₹100 crore in a year.
The company, which test-marketed the coffee decoction products in the last three months of 2018, expects the business to generate about ₹2.5 crore in revenue in February itself.
“We’re getting good feedback. The products are getting sold out on almost the same day; the travel pack especially is doing wonders for us. We got the product and the packaging right,” said Musthafa in an interview. He added that launching a ₹10 travel sachet pack was the “right decision”.
The company began operations in 2006 as a small store in Bengaluru selling fresh, branded, good quality idli and dosa batter. It is following the same strategy with coffee too. Rather than giving consumers a ready-to-use powder, it is retaining the freshness of its coffee by wet-grinding beans into a decoction.
About 8-9 months ago, the company had also launched vada batter in a pack that allowed consumers to make traditional doughnut-like South Indian vadas with ease. That has not been performing as well as expected due to supply chain issues, Musthafa said, adding that he is working to rectify the issue.
iD, according to Musthafa, used more than ₹100 crore of the ₹150 crore that it raised from PremjiInvest, the family office of Wipro chairman Azim Premji, in March 2017 to expand production capacity. While it currently has the capacity to make 1.3-1.4 million idlis per day, with the expansion, that number will go up to 4-5 million a day.
As for coffee, the company’s decoction has been test-marketed in 2,000-2,500 outlets across the country so far. Its overall distribution reach across products is around 10,000 outlets. Musthafa plans to launch all the company’s products in Delhi, Kolkata and Gujarat and also plans to introduce its decoction in some international markets.
The startup’s other new products include vada batter and an expanded superfoods range. This, along with geographical expansion, is expected to help the startup’s revenue to grow 45% in 2019-20, according to Musthafa.
He expects overall revenue to grow between 19% and 25% in the current 2018-19 financial year to around Rs220 crore.
But are the expectations too lofty? Devangshu Dutta, CEO of retail consultancy Third Eyesight, believes there are a bunch of people today who are not able to brew their own coffee—whether it is for lack of time, good raw materials or the know-how.
He concludes, “The challenge is of ensuring freshness and penetrating deeply. iD has the capability to penetrate fairly deep, and they’ve built up a reputation and a momentum for their products in the market. Based on the platform that they’ve built, it is not an unthinkable target.”
Source: livemint
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February 6, 2019
Written By Aditi Shrivastava, ET Bureau
Myntra and other ecommerce retailers like Amazon have been bringing on board new seller entities so as to not flout the regulations which prohibit online marketplaces from owning equity stakes in sellers.
BENGALURU: Flipkart’s subsidiary Myntra, which drives a large part of its business through exclusive brand tie-ups and private labels, has clarified that it does not own any equity stake in sellers on its platform thereby complying with the new FDI norms. The move signals a significant restructuring at Myntra since the company continues to sell brands through third-party merchants instead of directly from its brand stores.
Myntra and other ecommerce retailers like Amazon have been bringing on board new seller entities so as to not flout the regulations which prohibit online marketplaces from owning equity stakes in sellers. The regulations also disallow an ecommerce marketplace from making exclusive deals with sellers.
Fast-fashion brand Chemistry is now sold on Myntra by Wiztech, while AKS and Anouk sell through FashionTech and Mango is sold by WandWagon. Other private labels are being sold by sellers including Unistand and Mayazen. In December last year, ET reported that Myntra’s top alpha seller Vector E-commerce showed a 90% revenue fall in FY18, indicating that the platform was reducing its dependence on its top few sellers. “This will mean a longer paper trail to be compliant, and a middleman to squeeze margins,” said one person aware of the restructuring.
Myntra holds stakes in brands including Chemistry and ethnic wear brand AKS through its accelerator programme launched in 2017, which it said would drive about 5% if its sales. The programme offered brands technical, design and financial support, and the company at that time had said it will partner with about 10-15 local fashion brands. The fashion etailer also has a strategic partnership with Spanish brand Mango along with holding stakes in celebrity fashion brands owned by Saif Ali Khan, Hrithik Roshan, Deepika Padukone and Alia Bhatt, which exclusively sell through their portal.
Flipkart confirmed the restructuring to ET in an emailed response. “We did not have any equity ownership issues to contend with in our seller base. We are committed to full compliance with the new regulations,” it said. “There will be an immediate impact on Myntra’s margins, since now an intermediary will be introduced, who will invoice consumers for a percentage of the transaction,” said Devangshu Dutta, CEO of Third Eyesight, a specialist retail consulting firm. “However, as long as Myntra doesn’t hold equity in the seller and the seller doesn’t get more than 25% of its business from Myntra, they should be in the clear,” he said.
Myntra’s former CEO Ananth Narayanan had said private labels drive 25% of the company’s revenues and the business arm is profitable. The firm also has about 30-40 exclusive brand partnerships, which indicates that these brands derive bulk of their online sales from Myntra. “By design, Myntra depends a lot on brand relationships to boost sales. Brands work closely with Myntra since the etailer helps them manage product pricing and positioning. Selling equity does not solve the purpose since majority of these brands see their sales still come from Myntra,” said an investor, whose portfolio company sells products on the site.
What is interesting is that Myntra also has a joint venture with Prateek Apparel, which manufactures some of its private labels, sources told ET.
Source: economictimes
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January 31, 2019
Walmart paid a staggering $16 billion to take control of Flipkart, as it bet on the country’s growing consumption boom.
Written By DEBABRATA DAS AND DEEPTI CHAUDHARY
In the summer of 1993, less than a year after India’s economy opened up to the world, a little-known supermarket opened its doors at Archana shopping complex in a posh south Delhi neighbourhood. I was barely six at the time, but I still vividly remember the first time I walked through the doors of Nanz Supermarket. The store was larger than anything I had ever seen. Unlike dingy neighbourhood kirana stores, Nanz was brightly lit.
The entire shop floor was seemingly endless aisles of brightly coloured packaged foods, chocolates, and cold drinks from brands, which so far, I had only seen on hoardings of international cricket matches. Sitting in a shopping trolley pushed by my father while my mother filled it up, for the first time I felt no less than our cousins from Australia who kept complaining about the lack of supermarkets when they came to India. Overnight, the most mundane activity of buying household provisions had turned into an enjoyable family outing. But Nanz Supermarket was way ahead of its time. Or perhaps it was in the wrong place at the wrong time.
It struggled to replace your friendly neighbourhood kirana store uncle who remembered your name. And business-wise, rental costs were back-breaking. By the end of the 1990s, Nanz—a joint venture between Germany’s Helmut Nanz, who at the time was at the helm of a $2 billion German retail chain, Don Marsh of former U.S. convenience store Village Pantry, and India’s Nanda business family, the promoters of Escorts Group—had shut shop. A revival in 2002 didn’t last long either.
Jabong Warehouse, Pataudi Road, Gurgaon.
While Nanz has faded away, India’s appetite for modern retail has grown exponentially in the 21st century. Today, the urban landscape in many cities is dotted with shopping malls packed with people ready to shop till they drop. Online shopping is also booming in the country of 1.3 billion people, where some 420 million millennials are largely driving consumption because of their spending power and urge to splurge. More than 350 million Indians—more than the total population of the U.S.—are part of a family that has a combined income of more than `25,000 per month. More than 478 million people have access to the Internet and at some point in 2019, India is expected to overtake the United Kingdom as the world’s fifth-largest economy.
In the summer of 1993, less than a year after India’s economy opened up to the world, a little-known supermarket opened its doors at Archana shopping complex in a posh south Delhi neighbourhood. I was barely six at the time, but I still vividly remember the first time I walked through the doors of Nanz Supermarket. The store was larger than anything I had ever seen. Unlike dingy neighbourhood kirana stores, Nanz was brightly lit.
The entire shop floor was seemingly endless aisles of brightly coloured packaged foods, chocolates, and cold drinks from brands, which so far, I had only seen on hoardings of international cricket matches. Sitting in a shopping trolley pushed by my father while my mother filled it up, for the first time I felt no less than our cousins from Australia who kept complaining about the lack of supermarkets when they came to India. Overnight, the most mundane activity of buying household provisions had turned into an enjoyable family outing. But Nanz Supermarket was way ahead of its time. Or perhaps it was in the wrong place at the wrong time.
It struggled to replace your friendly neighbourhood kirana store uncle who remembered your name. And business-wise, rental costs were back-breaking. By the end of the 1990s, Nanz—a joint venture between Germany’s Helmut Nanz, who at the time was at the helm of a $2 billion German retail chain, Don Marsh of former U.S. convenience store Village Pantry, and India’s Nanda business family, the promoters of Escorts Group—had shut shop. A revival in 2002 didn’t last long either.
While Nanz has faded away, India’s appetite for modern retail has grown exponentially in the 21st century. Today, the urban landscape in many cities is dotted with shopping malls packed with people ready to shop till they drop. Online shopping is also booming in the country of 1.3 billion people, where some 420 million millennials are largely driving consumption because of their spending power and urge to splurge. More than 350 million Indians—more than the total population of the U.S.—are part of a family that has a combined income of more than `25,000 per month. More than 478 million people have access to the Internet and at some point in 2019, India is expected to overtake the United Kingdom as the world’s fifth-largest economy.
$2k per capita GDP to drive growth in consumption
No wonder then that when the No. 1 ranked Fortune 500 company Walmart Inc decided to restructure its global operations, it decided to scale back from the U.K. and place its bets on India. It paid a staggering $16 billion to take control of India’s largest e-commerce company, Flipkart, with a 77% stake last year. The deal is the largest in the e-commerce space worldwide, the biggest purchase by Walmart in its 56-year history, and easily the country’s most significant corporate move of 2018. “India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading the transformation of e-commerce in the market. We are excited by what the future holds,” Doug McMillon, Walmart’s president and chief executive officer, said after the deal was announced last May.
Source: McKinsey Global Institute report titled “Next Big Spenders: India’s Middle Class”
It was in a sense the perfect time for Walmart to enter India. After a failed attempt 10 years ago to set up physical stores in partnership with Bharti Enterprises due to an uncertain regulatory environment, the purchase of Flipkart provided it with a ready-made customer base, infrastructure, and operations to gain a sizeable chunk of the average Indian’s wallet. Walmart stepped on the accelerator from the get-go to integrate Flipkart within the universe of the world’s largest retailer. Compared to other mergers and acquisitions in India, work to integrate Flipkart with Walmart moved at a breakneck speed. Already a major restructuring has occurred within Flipkart: The back-end operations of its two fashion e-commerce portals, Myntra and Jabong, have been integrated and traffic from Jabong will soon also be directed to Myntra.
Barely a few months after the deal, India’s most successful startup entered a new phase of life without its founders. Co-founder Binny Bansal quit as group CEO in November following allegations of personal misconduct; the other co-founder, Sachin Bansal (not related to Binny), had already quit the firm when Walmart entered the fray in May. Although the startup community in Bengaluru was shaken by the exits and looked at the changes with apprehension, Flipkart insiders are brimming with confidence under their new chief executive officer, Kalyan Krishnamurthy. “The deal with Walmart is combining its global expertise with Flipkart’s market leadership, positioning both entities for long-term success. We strongly believe in this partnership’s potential to contribute to the economic growth of India by driving the next wave of retail and by providing quality, affordable goods for customers, while creating new skilled jobs and opportunities for suppliers,” says Rajneesh Kumar, chief corporate affairs officer, Flipkart Group.
Though Flipkart continues to pile up losses and is expected to remain a drag on Walmart’s results for the near term, Judith McKenna, president and CEO of Walmart International, sought to soothe investors’ worries in November. “We are in India for the long term and we are in India to be successful,” she said. That plan includes a greater focus on private labels, use of data analytics and artificial intelligence to drive efficiencies, and finally the holy grail of every modern retail chain in India—groceries.
Groceries is the new frontier for online shopping. Flipkart’s biggest rival, Amazon, has already tasted success in the segment through Amazon Now, which promises two-hour deliveries using products from its own warehouses and local supermarkets across several cities. Apart from Amazon, startups like BigBasket and Grofers have also had success in the online groceries space.
Judith McKenna, president and chief executive officer international at Walmart Inc.
We are in India for the long term and we are in India to be successful.
While the hunt for profitability is on, Flipkart wants to expand its footprint and get even more customers. It has a mission to add 500 million new customers with 200 million of those expected to come in the next three-five years. “Our aim at Flipkart is to grow the ecommerce industry as a whole across the country by innovating in newer, younger categories and focussing on customers from outside metros. From expanding our logistics network and the PIN codes we service to on-boarding smaller sellers from tier 2 and 3 cities, we are seeing impressive customer adoption in nonmetro cities,” says a Flipkart spokesperson.
Kalyan Krishnamurthy, Chief executive officer of Flipkart
A target like that would have seemed ambitious a few years ago, but looking back at the last decade, Flipkart’s ambitions seem more realistic. Though several websites like Indiaplaza and eBay India were the first movers in the e-commerce space in the country in the early 2000s, India’s love affair with online shopping was really cemented only towards the beginning of this decade. Today, India’s online retail market is estimated to be over $20 billion and is slated to grow to $200 billion by 2026, nearly 12% of the total retail market, according to a recent study by Morgan Stanley. While it is much smaller than China’s $1.07 trillion and the $511 billion U.S. e-commerce market, India is by far the fastest growing. Overall, India’s retail market size stands at $670 billion but it still remains largely unorganised with most business done through small kirana or mom-and-pop stores. Industry estimates suggest that by 2022, India’s retail market could well be over $1 trillion.
The aspirations of Indians have provided a boost to virtually all sectors with a direct connection to consumers. Whether it is FMCG, fashion retailing or consumer electronics like televisions, washing machines, air conditioners, refrigerators, and other such products, shopping seems to be India’s favourite pastime. A recent report by the World Economic Forum with Bain & Company says India is poised to be the third largest consumer market, behind only the U.S. and China. The report sees consumer spending growing from $1.5 trillion today to $6 trillion by 2030 with the upper-middle and high-income segments expected to grow from one in four to one in two households.
And it is not just e-commerce that is booming. Brick-and-mortar spending, especially in rural areas, is also rising sharply. Most in the FMCG industry feel the Indian consumption growth is at an inflection point where the only way is up. “We have clearly seen an improvement in rural consumption. Overall rural is growing at 1.25 times more than urban and that trend should continue over the coming years,” says Sunil Kataria, chief executive officer of India and SAARC at Godrej Consumer Products Ltd.
Sunil Kataria serves as Chief Executive Officer of India & SAARC at Godrej Consumer Products Limited.
We have clearly seen an improvement in rural consumption.Overall rural is growing at 1.25 times more than urban and that trend should continue over the coming years.
Rural customers are also increasingly choosing products that traditionally worked only in urban markets. Whether it is cream biscuits and chocolate chip cookies or chips and snacks made by multinationals, the shelf space in small-town stores is increasingly looking similar to that in urban areas. It is a trend that, according to Kataria, will only increase due to the investments in infrastructure made by the government which will help increase distribution to rural areas and make products more accessible.
Saumya Tyagi, Marketing Director, Tetra Pak
A lot of companies are addressing the needs of the bottom of the pyramid, the middle of the pyramid and at the same time, entering premium categories.
“The last decade (2005-2015) was about reaching the rural markets. With the improvement in infrastructure and road connectivity, we have already reached there. In the next decade, we will see consumers at rural and semi-urban levels try out products that conventionally were thought to be for only urban consumers,” says Mayank Shah, products category head at Parlé. Shah suggests that growing Internet penetration is increasing the aspirations of rural and semi-urban consumers.
Rising aspirations mean greater premiumisation in products offered to Indian consumers. Saumya Tyagi, director-marketing, India and South Asia markets, Tetra Pak, says far greater affluence has come into the Indian market in the last 10 years and this is reshaping the way Indians shop. “In every category, premium brands have emerged. Take fashion, for example. We have seen the likes of ZARA, H&M, Marks & Spencer and others enter the market. Even in the ice cream market, Magnum from Kwality has entered the market,” says Tyagi. “Today, a lot of companies are addressing the needs of the bottom of the pyramid, the middle of the pyramid and, at the same time, entering premium categories.
The combination of these conditions has created the perfect environment for big-ticket investments in consumerdriven industries like retail, e-commerce, and FMCG. Tetra Pak’s Tyagi points to the deals of 2018 as an example of how rising incomes and aspirations have made India’s consumer space an attractive investment destination. He is also convinced that investment from foreign entities will grow and the consumer space will be one of the most attractive industries.
While Walmart’s purchase of Flipkart was the landmark deal of 2018, the year will also be remembered for large investments into companies with a direct reach to Indian consumers. Deals like Unilever’s purchase of GlaxoSmithKline Consumer Healthcare and the Horlicks brand, Zydus Cadila’s acquisition of the Complan brand from Kraft Heinz, and investments in companies like Swiggy, Grofers, and BigBasket highlight the appetite for investing in India’s consumer space. Overall, more than $20 billion was invested in either acquiring companies or picking up a stake in firms in the e-commerce, FMCG, and retail space. “India is certainly one of the strategic markets on the radar of companies that have global ambitions, and there are few such large markets with similar growth prospects in the foreseeable future,” says Devangshu Dutta, chief executive of retail consultancy Third Eyesight.
Consumption in India has really grown after years of socialist-era deprivation before the economy was thrown open. “These deals are essentially highlighting the consumer story of India where we are seeing an increasing middle class, rising demand for health-related products, fashion products, and branded products,” says Pankaj Chopda, director, Grant Thornton India. “In the health space—across food, drinks, and organic food—we are seeing a lot of interest from companies wanting to make large bets,” adds Ausang Shukla, managing director, corporate finance, Ambit Capital. “Consumers are shifting a lot more towards healthier alternatives and for food companies, within all categories of consumption, the healthier alternatives are a big focus.”
Yet, no matter how robust the fundamentals, every industry has its risks. Some looming threats to the Indian consumption growth story are the seemingly uncontrollable farm distress, the need to create enough jobs, and regulatory uncertainties. One of the big hurdles has been the restriction on foreign direct investment in retail. In 2012, the United Progressive Alliance-II government tried to liberalise the policy and retail was split into two formats: multi-brand and single-brand. While 100% FDI was allowed in single-brand retailing, which allowed firms like Ikea and Uniqlo to invest in India, multi-brand retail was restricted to 51% and had several riders. The final call on allowing FDI in multi-brand retail was also left in the hands of state governments. As a result, the likes of Walmart and Carrefour stayed away from India. The growth of e-commerce opened a new window, but a cloud of uncertainty has emerged on foreign investment in the space.
The e-commerce industry is particularly concerned after the Department of Industrial Policy and Promotion tweaked foreign direct investment norms for e-commerce firms. It seeks to stop e-commerce companies from selling products of entities in which they have an equity stake and restricted online marketplaces (such as Amazon India, Flipkart) from selling any product exclusively on their platform. The revised norms will be effective from February 1.
K. Ganesh—Bengaluru-based promoter of ecommerce companies such as BigBasket, Bluestone, FreshMenu, and Homelane—feels some changes to the FDI policy in e-commerce go against the principles of free market economics. “This will negatively impact all the milestones achieved in the last 10 years during which billions of dollars of FDI have come in, millions of small sellers have had the opportunity to sell their products across India thanks to well-funded marketplaces, [and] lakhs of new jobs were created at the entry level,” he says.
Such short-term hurdles haven’t dampened long-term optimism about Indian consumption growth. Despite a global recession, demonetisation, and the rollout of the goods and services tax, over the past 10 years stocks of companies in the consumer space have outperformed the S&P BSE Sensex. So if you thought overcrowded malls during Christmas were a one-off phenomenon, think again. There is a long way to go before the Indian consumer’s appetite is satiated.
Walmart paid a staggering $16 billion to take control of Flipkart, as it bet on the country’s growing consumption boom.
(Additional reporting by Arnika Thakur, Debojyoti Ghosh, and Rozelle Laha)
(This story was originally published in the January 2019 issue of the magazine)
Source: fortuneindia
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January 13, 2019
With its ‘Shopping on Instagram’ feature, the company will help customers buy products online. Apart from India, the company is expanding the feature to 26 countries from existing 46 countries.
Written By Sandeep Soni
Instagram even beat out TV in this younger target group, a medium only 3 percent of respondents said was a primary platform.
Instagram is planning to compete against e-commerce biggies in India such as Amazon, and Flipkart even as Google too launched its shopping search feature last December. Facebook too had been testing the Indian e-commerce waters in the past.
With its ‘Shopping on Instagram’ feature, the company will help customers buy products online. Apart from India, the company is expanding the feature to 26 countries from existing 46 countries, the company said on its website. That seemed imminent since India is its second largest market with 71 million users – as per company statistics site Statista – following the US with 121 million users as of October 2018.
Selling on Instagram, hence, is a no-brainer for e-commerce startups particularly in fashion. “It is a great channel for an online fashion store like us to sell items to the right audience since the majority of its users are teens. Also visually it is very rich and that’s what a fashion brand needs,” said Sujayath Ali, co-founder and CEO of Sequoia Capital-backed online women fashion marketplace Voonik.
Also for startups like online-to-offline shopping marketplace Fynd (that offers its open API for businesses to develop omnichannel retail apps), it is a great opportunity. Fynd’s API, for instance, powers Google’s What’s In Store feature for shoppers to find out products stocked in stores near them. “I am sure once Instagram launches this, it will look at tech platforms like us to enable that,” its co-founder Farooq Adam said.
Mindset Matters
As Instagram looks to monetize its traffic and help customers get instant shopping gratification, it is important to understand how does it convert the eyeballs to actual purchases.
From the customer context, his/her mindset while browsing a brand page versus on an e-commerce site versus on Instagram is different “On a brand’s website it is about having already discovered the product, on marketplaces like Amazon then they are looking to discover products, but on Instagram, instead of buying it is more about aesthetic elements. I am not sure if it can drive customers to buy products,” said Devangshu Dutta, CEO at retail consulting firm Third Eyesight.
According to details mentioned on the Instagram website, a business can tag up to five products per image or video and up to twenty products per carousel in a feed. When an Instagram post is created with tagged products, the post is shared with the business’s audience on Instagram. The customer can check the product’s price and details and click on it which is directed to the product description page on Instagram. Customers can then go to the website of the product to buy it.
Here, the discoverability aspect of Instagram to allow customers to find the latest trends in products works great for startups. “As a discovery platform, it will help startups with significant access to customers and influencers,” said Pinakiranjan Mishra, partner and national leader, retail and consumer products, Ernst & Young India. “However, Instagram might start charging startups in some way,” added Mishra. The business account on Instagram, similar to Facebook, is free.
From a discovery platform, if Instagram switches to an e-commerce model and starts transacting then there will be some impact. “Most of the fashion startups are too small, so it might impact them mid-to-long term instead of short-term because the market is growing,” said Mishra. However, it might as well not be the case.
Customer Delight?
According to Forrester’s 2018 Customer Experience Index based on a survey of over 9,000 Indian online adult consumers in 2018, the rate of improvement of customer experience is slowing down. “Of the 36 brands surveyed, just five had a statistically significant rise in their scores, compared with 20 last year. The five companies include Bharti AXA, HDFC Bank, American Express, e-fashion and accessories site Koovs.com, and electronics retailer Ezone.
Across the end-to-end transaction in e-commerce that includes discovery, order, delivery, and post-delivery problems such as returns or refunds; customer experience has to be seamless. And, Instagram might struggle in it.
“While Instagram is good in product discovery and it might even figure out ordering, and payments but delivery and post-delivery experience will be very difficult as both are very operational in nature,” said Ali. “Companies spend decades to get them right. Neither Facebook, WhatsApp or Instagram have any experience in the physical operation of goods. So either they would stay away from it or would not do a good job.”
Instagram didn’t respond to the email seeking comments for the story.
Even if Instagram is able to pull off all that successfully, the fact that the transaction is initiated from its platform, customers might not find it seamless in case of any default. “If the customer buys a product, he/she is buying from the Instagram environment whether the payment happens on the brand page, e-commerce site etc. So, Instagram will be responsible for how it executes management of customer expectations,” said Dutta. “I think Instagram will drive impulse purchase, unlike fashion e-commerce sites where the buy is planned instead of impulse.”
Source: financialexpress
