After emerging as one of the biggest spenders on advertisement in 2014, the e-commerce industry looks to continue the trend in 2015. According to estimates e-commerce accounted for around Rs 750 to Rs 1,150 crores of the total ad spends in 2014. Media planners and e-commerce players we spoke to say that this could go up by as much as 40 per cent, with the more conservative suggesting an increase of 20-30 per cent. This would put the ad spends by e-commerce sector alone at around Rs 1,300 crore approximately.
Dinesh Vyas, GM of OMD believes e-commerce could end up contribution 10-12 per cent to overall adex in 2015. He expects the overall adex to improve by 10 per cent, which would bring it close to around Rs 40,000 crore. “Primarily, the normal growth (for e-commerce) would be probably close to about 6-7 per cent, which is normal growth across categories. I think the ecommerce, telecom, auto sector are certainly going to contribute much more,” said Vyas.
PM Balakrishnan, COO of Allied Media attributes this to the fact that consolidation and expansion is just starting in this particular sector and, says he, TV will be the “no option” medium. He likens this to the Cola and FMCG wars of the 90s. “Apart from consolidation, there are a host of other players especially in the service and hospitality sectors that are going to enter the sector. All of them have no choice but to increase their spends and go high on ATL. In terms of capturing mind share, TV is the best medium and so they have no option but to spend on it. They all will have to outshout each other,” he said.
When asked how much he expected the ad spends to go up by, Balakrishnan estimated that e-commerce ad spends (as part of the overall ad pie) would go up by at least 20 per cent over 2014.
This seems to be in line with what others have also suggested. The recently released Pitch Madison Advertising Outlook 2015 stated e-commerce as the biggest drivers of ad spends in 2014 after the Lok Sabha elections. Sam Balsara, Chairman and MD of Madison World, informed that e-commerce ad spends were at around Rs 1,150 crores; about 3.6 per cent of the total advertising ad spends.
The report stated that e-commerce will continue to be a strong factor in the growth of ad spends, especially for mediums like print and OOH in 2015.
E-commerce players we spoke to also agree that ad spends will continue to increase in the face of competition and as companies look to build their brand identity.
“The increasing cut throat competition and the need to create a strong brand recall and connect with consumers e-commerce companies will have to focus on ad spends going forward in 2015,” said Sameer Parwani, Founder & CEO, CouponDunia.in. Vineet Sehgal, CMO of Quikr said the newer brands, especially in certain verticals, will probably start adding to the overall noise levels as well, while other brands start becoming more efficient with their spends.
Nitin Agarwal, Senior Marketing Director at ShopClues feels two of the big drivers for increasing ad spends will be regional expansion and players looking to popularize mobile apps and mobile shopping. He points to Snapdeal , which spent aggressively during the festival season in 2014, as an example of the former.
Praveen Sinha, Co-founder and MD of Jabong also believes that the indications point towards a rise in e-commerce spends being more likely. According to him, some of the players, which were very aggressive last year might look to stabilize spends in 2015 but there is a new crop of e-retailers, which have raised funds this year and who will want to spend on marketing activities. “I would expect about a 20-30 per cent rise in e-commerce ad spends in 2015,” he said when asked to hazard a guess.
Another reason for this is that the cost of advertising is also expected to get more expensive. This could be true especially with service tax increased to 14 per cent.
TV was one of the main mediums used by the e-commerce sector in 2014 and this is expected to continue according to e-commerce players we spoke to. “The major drivers are going to be TV, especially TV roadblocks on premium properties, which we also saw in 2014, print, not only at national, but also at local level, digital and on-ground activities like fashion shows, sports, etc.,” continued Sinha.
The reason for this is manifold. On one hand, it is still, as Sehgal puts it, the easiest and the most efficient way to reach mass audiences, which makes it a natural ally for an industry that is in hyper growth phase and trying to recruit new customers in a short time. “Additionally, due to the nature of the television medium, if used right, it can help build character and differentiation for the brand,” opines Sehgal.
He, however, opined that the role of TV can’t stay exactly the same in a marketing mix as the brand evolves. “As the focus for various brands shifts from pure awareness building to affinity building, the way that TV is used will also evolve – there may be less focus on pure FCT campaigns and more need for things like content integrations and other innovations,” he added.
The other reason is the fact that it helps build credibility, which is something other media planners have also commented on. “Growth on digital has saturated. The people who are digital savvy are already aware of e-commerce. The growth now will come by targeting TV audience,” opined Agarwal. Agarwal, himself, said that ShopClues is looking to spend Rs 70-100 crore on mass media marketing campaigns, an increase of 4-5 times over last year, which is mainly because of an increased focus on TV campaigns. Overall, he expects the e-commerce sector to increase ad spending by 30-40 per cent.
But TV is far from the only medium that e-commerce players are turning to. Take the case of Pepperfry, which has identified digital, especially search, as the medium for what its founder and CEO Ambareesh Murty says is the ‘interest’ aspect of marketing. Murty said that Pepperfry expects to spend around Rs 100-150 crore on marketing activities through 2015 and early 2016.
“We are connecting with more customers using a multitude of media and we are therefore spending marketing dollars to connect with a multitude of customers. I feel that trend is here to stay,” said Murty. Radio, is another avenue that Pepperfry is looking at as it seeks to become more hyperlocal.
Similarly, Parwani also said that the main focus will be on digital medium, especially video. “In the offline medium, we are currently in the test phase for rickshaw ads from Bandra to Andheri. We are also toying with the idea of investing in outdoor advertising as it helps us with visibility. This year we will be using guerrilla marketing techniques for advertising,” he said.
It is definitely clear that not only are e-commerce companies willing to spend, and spend big, but they are also willing to experiment with different mediums and avenues, rather than sticking with just mass media.
But this aggressive spending also impacts the topline and this is important as most e-retailers are far from turning in profits. When quizzed about this aspect, Sehgal said, “All business is about trade-offs in the short term. For the ecommerce industry, at this stage developing the market is priority which will ultimately pave the way for profitability a few years down the road.”
In a similar vein, when quizzed whether it makes sense to sustain such high spends, Agarwal said, “If you see, business is increasing 10-20 per cent per month, so from that perspective the spends are not all that high.”