Flipkart start-up which grew in its formative years under
the guidance of a bunch of go-getters from IIT-Delhi created a sensation with
the ‘big billion day’ sale on 6 October 2014.
In eCommerce, your
prices have to be better because the consumer has to take a leap of faith in
your product.
-Ashton Kutcher, celebrity, investor and entrepreneur
However, the discount mania came to stay in the Indian e-
commerce industry. The mania reached its height with the big billion-day sale
on 6 October 2014. Flipkart decided to sell goods at impossible prices. The
excitement led to confusion and confu-sion led to Flipkart apologising. So the
question that arises is who gained from the fiasco.
e-commerce market places
In India, Internet penetration is increasing exponentially.
This, many believe could lead to “the rebirth of e-commerce
industry.” However, the onus lies on the e-commerce players
to get the netizens to their websites.
Without doubt Big Billion Day has been able to attract
reticent consumers to the different e-market places. Snapdeal ran an
advertisement on the same day: “For others it’s a Big Day. For us, today is no
different.” According to Flipkart’s official numbers the sale for the company
was at almost a billion rupees. Hence, the cumulative sales of the two Indian
e-commerce market places touched Rs.2 billion. Not to be left behind Amazon
used a cost effective strategy for increasing visits to their web-site: they
bought the domain name bigbillionday.com. Hence, anyone who typed
bigbillionday.com was directed to the Amazon website.
Clearly, the e-commerce market place seems to have gained
from the whole exercise especially keeping the gifting season in mind. Sales
have not only increased for the big billion day but remained high even after
that. The perception cre-ated from the whole exercise is, online buying is
cheap.
Customers – loyal and potential
Flipkart customers were unhappy because they hardly could
buy anything that day. However, consumer memory is short and the in-cident does
not seem to have dissuaded these customers from shopping online at
flipkart.com.
It should also be noted that the customers faced the same
kind of problem at the time of the launch of Moto -G and there was hardly any
hue and cry over it.
Offline market places and traders
It is beyond doubt that this kind of predatory pricing would
kill competition. The worst sufferers would be offline
market places and traders. The cost structure of an offline market place does
not allow the companies to provide this kind of discounting. Eliminating
middlemen helps online companies deliver at lower prices. In the United States
a lot of bookstores, notably the popular Borders, closed as they could not
compete with Amazon. So what is the way out for these offline com-panies in
India? AAP leader Adarsh Shastri, who has spent considerable time at Apple,
Samsung and Vodafone, has taken the cudgels on behalf of more than lakh small
time mobile phone traders so as to lobby with mobile phone manufactures on
protecting the interests of small traders. However, such protectionism might
not work in the face of dynamic nature of e-commerce market.
In all probability the line that proactive traditional
retailers are expected to take would be to collaborate rather than compete with
the online market place. For proof, see the Future Group collaborating with
Amazon to sell their products online.
Regulators
The e-commerce discounting melas are a reminder that
e-commerce is a highly unregulated market with very few con-sumer protection
mechanism in place.
Like, it is possible that the market place increases the
price a day before the discount mela and then provides discounts on the high
prices. There is thus the need to have a separate proactive regulator for
e-commerce markets as the industry is growing fast and needs hands-on
regulations.
The author is Assistant Professor, VJIM Hyderabad.
First published in Industrial Economist, November Edition