2016 for ecommerce: Teething competition, markdown in valuation and huge investment
The online retail market in India was reported to amount to just $14-14.5 billion in 2016, compared to roughly $14 billion last year. Despite the slow growth, the market last year saw ruthless competition among the three dominant players (Flipkart, Amazon India and Snapdeal) to edge past one another. It also saw them working on their backend and logistics at the same time. Merger, partnership, acquisition, steep markdown in valuation, huge investments and brand makeover, year 2016 witnessed everything. A look at how the year treated the top three marketplaces
Fast pace of growth at Amazon India
According to Amit Agarwal, Business Head, Amazon India 2016 had been ‘the most exciting year for them.’ He claimed that every single quarter, the e-commerce marketplace had been growing triple-digit year-on-year. This is also the year when it managed to narrow the gaps with market leader Flipkart and even managed to edge past it in July and August in term of sales.
India became a priority for Amazon with its founder Jeff Bezos pumping in $5 billion in the country. The investments definitely showed results as Amazon India posted robust growths in revenue and shipments. Cloudtail India Pvt. Ltd, the largest seller on Amazon India’s marketplace, saw its revenues shoot up to Rs 4,591.2 crore in FY2016, up from Rs 1,145.4 crore in the year-ago period. Amazon’s seller base reported to grow 160 per cent to 140,000 in 2016 and the company is adding 180,000 products per day. Besides, it started rolling out its services including video-streaming service Amazon Video Prime India, a platform for start-ups, Launchpad, beauty service segment and a wallet like feature called Amazon Pay Balance. It introduced Global Store in the country to give Indian customers direct access to over four million global products. It also expanded its grocery and household service Amazon Pantry to six more cities across the country. However, its loss reported to soar up to Rs 3,572 crore, compared to Rs 1,724 crore the previous year.
Not surprisingly, Amazon India reported a huge advertising spend of Rs2,163 crore. Like Flipkart, it will be focusing on the high-margin fashion segment in 2017.
Fashion first at Flipkart
2016 had turned out to be a rollercoaster year for this homegrown e-commerce with its steep markdown in valuation, series of top-level exits, strengthened position in the fashion and lifestyle segment and facing cut throat competition from its US counterpart. Flipkart suffered a dozen successive markdowns; the lowest was by a mutual fund managed by Morgan Stanley in November which put its value at $5.57 billion, a sharp fall from the peak $15.2 billion valuation last year. The company left its former head of marketplace Mukesh Bansal, its chief financial officer Sanjay Baweja, chief product officer Punit Soni, chief technology officer Peeyush Ranjan and chief business officer Ankit Nagori this year. The co-founder Binny Bansal had taken over as CEO and partner Sachin Bansal had moved to the role of executive chairman in the beginning of the year.
When it comes to fashion space in July Flipkart strengthened its position as the undisputed leader after it acquired Jabong from Global Fashion Group. As per reports, the valuation of the deal is for $70 million. Myntra, Jabong and Flipkart together have 70 per cent market share in the country today. Earlier in 2014 the homegrown ecommerce took over Myntra for an estimated deal size of $300 million. The latter has been a successful turnaround with Myntra clocking in $1 billion+ GMV run last October. Flipkart Fashion is being revamped to expand its user base beyond the current mass segment. The home grown e-tailer is reintroducing its fashion business as it partners with over 100 stylists who will curate fashion trends and accordingly push products on its platform. Much like traditional brand retailers, it is in talks with movie production houses to sell their collection starting next year.
On the marketing front, it was aggressive during the usual festive times including Diwali when its name appeared in the BARC’s list of top advertiser for week 40 (October 1-7) along with other ecommerce marketplaces and in December under Myntra. As the Bangalore-based ecommerce marketplace turns 10 this year, it is hoping to retain its leadership position with innovation, more focus on fashion and better quality products at affordable rates. Profit is on its radar as Flipkart Fashion is expected to turn profitable by the middle of this financial year and Myntra will EBITDA positive with annualised gross sales of $2 billion by the end of fiscal year 2018.
Snapdeal’s brand overhaul
If 2015 was a year of acquisition 2016 was about rebranding and marketing. In September it came out with a new brand identity called ‘Unbox Zindagi’, whose campaign was conceptualised by Prasoon Joshi and his team at McCann Worldgroup. With this, it aimed to position itself differently in the hyper-competitive e-commerce business. It was rolled out at all touch points, on the app, website, and mobile site and through all brand communication. This happened on back of Snapdeal allocating Rs 200 crore as marketing spends for a span of two months which it announced in September. This explains its surprise appearances in BARC’s list of advertisers titled ‘Top 10 Brands’ from September onwards.
The brand got more aggressive about its ad spends on TV especially during festive period with its name turning up on BARC’s list more frequently than others. A rebranded Snapdeal reported to sell 11 million units in a week during the festive season sale – a distant third after Flipkart, which sold 15.5 million, and Amazon’s 15 million units. Kunal Bahl’s start up made headlines in the ecommerce world when it announced its tie-up with multiple players like Zomato, Redbus, Cleartrip and Urbanclap to cross-sell their offerings (food ordering, flight and bus ticket booking, hotel reservations and home services) on its platform to lure more customers. This was also the year when Snapdeal concentrated on its backend and worked on optimising its supply chain network across the country. In fact, it launched its ‘Snapdeal Gold’ to provide free next-day delivery for orders, which are paid for online also to take on Amazon Prime. 2017 will be another year for the Indian etailer to focus on growth and hasten its delivery time.
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