With the festive season just around the corner and consumers’ sentiments and demands showing a delightful upward curve, Amazon and Flipkart, just like every year have left no stone unturned to reap benefits out of the same to the optimum. As the ‘Great Indian Festival’ as well as ‘The Big Billion Days’, the flagship festive sale schemes of leading e-commerce giants- Amazon and Flipkart respectively, just wrapped up the last of their deals, stats show us that these players have done what no other government policy or incentive could do- greatly revved up the customer sentiments beating all the economic slowdown blues flat on their face. A look deeper into these festive extravaganzas reveals how both companies are sailing so well amidst the sticky economic situation of today.
The opening day sales of both companies were twice of what they were the last year. On Amazon, big brands like Apple, One Plus, and Samsung witnessed sales worth a whopping INR 750 crore. More important than the humungous volumes of these sales is how both these companies swiftly glided into new markets across Tier 2 and Tier 3 cities as Amazon saw 91% of its new customers emerging from such towns and Flipkart too recorded its customers doubling from these places as against the figures of last year’s sale. With deepening internet penetration and increased adoption of smartphones, it is expected that 70% of the Gross Merchandise Value is going to come from these cities by 2023. Even as the FMCG and retail sector is crippling hard with the sluggish consumer demand, e commerce companies are leading the race with their aggressive discounting practices, providing the consumers ‘a bang for their buck’. And, it’s not only the heavy discounts that has been bringing in the customers, affordability programmes like no-cost EMI, exchange offers, instant bank discounts, free delivery on first orders and other such schemes attributed equally well to the healthy figures. Customers of today are becoming increasingly accustomed to the value proposition offered by shopping online- monetary benefits, ease and convenience through just one click of the mouse. Analysing the trend over the past half-decade, it is pretty evident that even when economic conditions are distressed, e commerce companies are less affected. There is a general perception that the pricing on these online platforms is much better as compared to offline retail. Also, when spending slows, masses look for better money saving deals that e commerce companies are better equipped to provide that too across a range of more than 200 million products.
It is often said that the best way to catch a consumer is to first of all create awareness about the brand and then reassure him how the company will provide the service at the door of the consumer. Having perfectly covered the awareness aspect, Amazon took a step forward by taking these curated offerings even closer to the customers this year. Following a 360-degree approach spanning across 9 languages all throughout TV, print & digital media, Amazon, has perfectly tugged at the consumer emotions in India with its unique initiative #AmazonFestiveYatra, which features a one of its kind festive ‘house on wheels’ housing the entire curation of 600 products, visiting 13 cities over 6000 kms throughout the festive season, giving the consumers & sellers a great opportunity to engage and share insights and opinions. Using behavioural and psychographic segmentation strategies, Flipkart too has positioned itself as a trustworthy and customer friendly brand over the years. Having its own distribution firm- Ekart and its own payment gateway- Payzippy has all the more backed up the company to have a check on its expenses and pass on the ultimate benefits to the customers. With its innovative branding strategies of the “big billion day”, “No Kidding, No Worries”, “Fair-Tale”, “Shopping ka Naya Address”, “Shop Anytime, Anywhere”, Flipkart has very successfully garnered a position amongst the market leaders over the past couple of years.
However, a look at the past reveals that both these companies used to spend hundreds of crores on expensive marketing and branding campaigns, in order to lure customers. Such costly schemes resulted in higher burn rates for top online retailers, which forced them, especially Flipkart, to turnaround their overall marketing strategy. With this revamping, came into picture the ‘Great Indian Festival’ and the ‘Big Billion Days’, which with their low cost social media promotion strategies have emerged as high return channels considering how with a rise in per capita income, India’s internet user base has grown to be the second largest one along with a change in customer tastes and demands. As festive sales account for more than 40% of the sales by these e commerce companies, festive season, when Diwali bonuses are given and Indian families splurge heavily on shopping, are the most important milestones for the entire industry. And all this fuss ultimately leads one to wonder how on earth do Amazon and Flipkart fund such huge discounts that they offer on after the other.
Amazon, after comparing the prices with other platforms as well, suggests to its sellers the amount of discounts they can offer on the products, however, it does not force them in any way to strictly adopt these. Though, sellers ultimately keep these recommended prices only as at the end, Amazon finances the discounts. As per a report by Mint, the functioning of this entire process goes like this: at the end of a certain period, sellers send in a debit note to Amazon labelled “promotional funding”. This note contains the amount of discount that the seller gave on apparel, electronics, toys and other products sold on the site. Amazon then pays the seller by cheque and in some cases, also gives additional money as the seller’s margin. This debit note is over and above what Amazon collects from the customer. For example, if a product worth ₹ 200 is sold off by a seller on Amazon for ₹ 140, the online retailer will collect ₹ 140 from the customer, keep a cut for itself, and give the remaining proceeds to the seller. Then, Amazon will also give the seller an additional amount to account for the discount offered by the seller which could be ₹ 60 or lower. Amazon India also stated that the company’s investment in technology and infrastructure had allowed sellers to save costs and consistently offer attractive prices.
Flipkart suggests prices but unlike Amazon doesn’t typically pay the amount of discounts to sellers by cheque. Instead, it forgoes commissions or listing fees that marketplaces usually charge their sellers. The discounting process that these companies undertake also highlights partially the streams where the huge capital infusions done in them by big venture capitalists etc. are used up. To sum up in the words of Mr. Amit Agarwal, Amazon India’s chief, “A huge opportunity lies ahead as this sale event demonstrates, it’s a long journey, and we are taking a 10-year-view as India will have the largest internet population in the world.” True enough, but at the end of the day, what these companies must keep in mind is not only to become world leaders as ‘global companies’ but more importantly, focus on becoming a ‘local company’ as well.
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A highly driven and motivated individual, Aradhana is currently a B.Com undergrad at SRCC. Always on the lookout for being a better version of herself than yesyerday, Aradhana has always found her muse in pen & paper. We leave the rest for her articles to communicate to you about what buzzes around this budding writer’s head!