28.10.14

A Cracker of a Diwali for E-tailers




This Diwali, Indian online retail industry joined the mainstream with the top three players Flipkart, Amazon and Snapdeal hogging the limelight throughout the festive month of October, helped by massive sales and high-octane marketing. However, the heavy-duty sales with discounts of over 75% also exposed the industry's weakest link -last mile delivery. Logistics infrastructure of online retailers struggled to deal with the sudden rise in the flow of shipments, leading to pile-ups at airports and packages failing to reach customers on time.
However, with top companies exceeding their targets, experts said the positives far outweighed all the negatives.
Flipkart, for example, was targeting $3 billion (over Rs.18,300 crore) in overall value of goods sold by end of the fiscal and $4 billion (over Rs.24,500 crore) by mid-2015.“They are now targeting to reach $4 billion by end of this fiscal itself,” said a person with knowledge of the company’s sales.
Another person in the know said: “Flipkart has already seen over 80 lakh orders this month and is targeting to do about double next month.” In June last year, Flipkart’s peak sale was 1.3 lakh orders in one day. During the Big Billion Day, Flipkart’s biggest sales event on October 6, the company sold 20 lakh products worth about $100 million (over Rs.600 crore).
Rivals Snapdeal and Amazon have been equally impressive.
“We received daily orders of about 3 lakh,” said Sandeep Komaravelly, senior vice-president of marketing at Snapdeal. He said sales in October have more than doubled from September, and the company saw 250% growth month-on-month.
Industry insiders expect Snapdeal to touch gross merchandise sales of over Rs.700 crore in October, significantly higher than its sales of  Rs.450-500 crore over the preceding three months. The company has crossed $1 billion (over Rs.6,000 crore) in sales this fiscal.
Amazon India has seen over-four-fold jump in transactions, according to a person with knowledge of the company’s sales. The company saw a jump in traffic of up to 300% on various days during its 30-day festive season sales. “The response has been beyond our wildest expectations,” said Amit Agarwal, country manager and vice-president at Amazon India.
Arvind Singhal, chairman of retail advisory Technopak, said: “I don’t see a single clear winner among the top three. The growth overall has been spectacular. The aggression shown by them has ensured accelerated growth.” The aggression was in the form of highly visible advertisements and brand promotions.
E-commerce companies are estimated to have spent about Rs.200 crore on advertising just this festive season. Snapdeal alone got on board 28 celebrities and created 50 advertisement films.The company had blocked up to 2,000 ad spots a day across television channels.
A senior executive at a logistics firm said: “Average shipments per day were at about 1 million before the festive season for the industry and that has almost doubled.” The online retail boom was not a big city phenomenon.
“The small locations have seen big volumes. We are fulfilling about 200 orders a day in a small centre like Theni,” said TA Krishnan, chief executive of ecommerce focused logistics firm Ecom Express.
Flipkart said it now reaches about 1,000 cities and towns in India through its inhouse logistics team and third-party partners, compared with under 900 before October. Amazon, which did not share the exact amount of sales during the month, said over half of all orders were from non-metros.
But the problems in the industry were also brought into sharp focus this season.
Delay in delivery, chocked airports and increased focus by tax authorities were just some of the troubles that may continue to hobble the rapidly growing sector for some time.
After Flipkart’s sales event, traders body Confederation of All India Traders (CAIT) has demanded a probe into pricing models used by e-commerce companies.
While commerce and industry minister Nirmala Sitharaman clarified there is no investigation into Flipkart’s October 6 sale, state tax authorities have taken notice. “The tax authorities in almost all states are saying if they have so much money to spend on advertisements why not pay tax in their state,” said a senior ecommerce executive, who declined to be named. “In Bihar, authorities are already cracking the whip against logistics players who are making deliveries by telling them to pay value added tax.” The biggest problem by far is delay in deliveries.
On online consumer complaints platform Akosha, online retail-related complaints have shot up from 700 a day to 3,000. “A number of customers were shopping for Diwali and their orders have not reached in time for Diwali,” said Ankur Singla, chief executive officer at Akosha.
About 30% of complaints are about delayed delivery.Typical delivery period has increased from under five days to over 10, according to logistics executives.

No comments: