Flipkart hits $100 million Big Billion Day Sale target in 10 hours
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India’s biggest online retailer Flipkart took just 10 hours to hit its target of $100 million in gross merchandise value (GMV), or the value of goods sold, on Monday, when it hosted its Big Billion Day sale, its co-founders Sachin Bansal and Binny Bansal said.
The day saw significant offline and online activity by rivals Snapdeal and Amazon’s local operation (the first took out ads mocking Flipkart’s sale; and anyone who typed BigBillionDay.com on their browsers landed on the Amazon.in site), confirming that e-commerce wars are the contemporary version of the cola or soap wars.
Snapdeal on Monday ran a campaign with the tagline: “For others it’s a big day. For us, today is no different.”
Amazon has been running a sale from 4-6 October, calling it the Mission to Mars weekend.
The Flipkart sale could set the tone for this festive season, the business end of which is likely to be played out online, as Mint first reported on 9 September. The festive season normally sees a spike in sales of everything from apparel to electronics to cars and bikes to jewellery, even paints.
Meanwhile, scared at seeing customers rushing in droves to e-commerce firms Flipkart, Amazon and Snapdeal, offline retailers are being forced to increase discounts and promotional schemes this festive season even at the cost of a significant hit to their margins.
Flush with money from recent fund-raising efforts, Flipkart, promoted by Flipkart India Pvt. Ltd, and rival Snapdeal are pulling out all stops to woo shoppers in a period that is crucial for them to justify, and possibly increase, their soaring valuations.
The world’s largest retailer Amazon, meanwhile, is matching every step and promotional offers by local firms as it seeks to become the biggest player in India.
“The Big Billion Day is an unprecedented day for us as this is the biggest sale ever in India. We are delighted by the overwhelming response from our customers since 8 am today. We got a billion hits on our site today and achieved our 24 hour sales target of $100 million in GMV in just 10 hours,” Sachin Bansal and Binny Bansal—who are not related—said in a statement.
Snapdeal also said it had a record breaking day of sales on Monday.
“We witnessed sales of over a crore rupees a minute, with lakhs of products being sold in a single day,” Snapdeal’s co-founder and CEO Kunal Bahl said in a statement. “Over a million Snapdeal apps were downloaded in one day.”
“The best part of the day: we didn’t really spend much to bring customers to Snapdeal,” he added. “We promise to deliver great value on great selection of products every day to all our new and existing customers and that is the simple recipe that continues to work for us.”
The ad wars
According to TAM AdEx India, a division of TAM Media Research Pvt. Ltd, which tracks advertising volumes and spending across media, between the first half (January-June) of 2005 and the first half of this year, the category that includes e-commerce companies moved up from fifth rank to third in terms of TV advertising volumes.
In print, the segment moved up from fourth to first, and in radio, from second to first. According to TAM AdEx, between the first half of 2010 and the first half of this year, TV advertising by e-commerce firms grew almost three times by volume and radio advertising six times (print advertising by e-commerce firms grew by a modest 40% in this period).
Thanks in part to the tens of crores spent, primarily by Flipkart, which promised “India’s biggest ever sale” on Monday, as well as rivals Amazon and Snapdeal on advertising their festive season sales, millions of people are expected to buy all kinds of things on these sites, quite possibly at the expense of offline retailers.
Flipkart, Amazon and Snapdeal together spent more than Rs.100 crore on advertising their festive season sales ahead of Monday, according to one person familiar with the matter who spoke on condition of anonymity.
The offline challenge
The change in buying habits of customers, who are now fast getting used to around-the-year discounts on e-commerce sites, is forcing offline retailers to react.
Although e-commerce accounts for less than 1% of the total retail market in India, it is by far the fastest growing retail channel. It is estimated to grow to as much as $22 billion (excluding travel) in five years from $3.1 billion currently, according to a November 2013 report by CLSA.
With prices of several products, including clothes, phones, tablets and computers, at all-time lows on e-commerce sites during the ongoing festive season, offline retailers are now increasing their discounts and promotions to try and stem the loss of customers, even though such prices may be, in their own words, “unviable”.
“Yes, it will dent retailer margins but what’s the option? It’s still better than losing market share and sitting on a ton of dead stock,” said Harminder Sahni, managing director at Wazir Advisors, a consumer goods and retail consultancy. “This situation for offline retailers is only going to get worse. Retailing is getting more efficient and more technology-based and Amazon, Flipkart and other e-commerce sites are much ahead of offline retailers in these aspects.”
“Today it’s no longer about having offers only during the sales period. Consumers are bombarded with offers throughout the year,” said Harkirat Singh, managing director of Woodland, an outdoor and adventure shoes brand with 480 company-owned stores and 4000 shop-in-shops. “We have to accept this change in the market place and consumer behaviour and change with market.”
Woodland has also got tie ups with portals like Myntra and Snapdeal which has led to an increase in the number of offers on the brand, Singh said.
“We have bigger and better offers than the year before. It is definitely at the cost of margins but volumes are expected to be better,” said Ajit Joshi, chief executive officer at Infiniti Retail Ltd, a Tata group enterprise which runs the electronics retail chain Croma.
Over the past year, thousands of small stores have shut and several modern retailers and brands including Canon, Sony and Dell have complained that the “unviable” prices offered by e-commerce firms are hurting the image and value of brands and making the retail business unviable.
They can’t avoid being available online, but with e-commerce sites regularly offering deep discounts, does it hurt their brand value?
For instance, on Monday, the Apple iPhone 5s was available for as less as Rs.30,000 on some sites. The product’s maximum retail price is more than Rs.50,000.
“If discounts are there for a sustained period of time, then yes, there’s every risk that the brand image will get hurt,” said Kiran Khalap, co-founder of brand consultancy Chlorophyll. “Eventually brands will have to do something about it and get the discounts to reduce, because it is harmful to them in the long run.”
Flipkart had been marketing its Big Billion Day sale for more than 10 days. On Monday, Flipkart offered discounts of up to 90% on gadgets such as Nokia Lumia phones and Samsung Galaxy tablets.
The company’s co-founders Sachin Bansal and Binny Bansal wrote an email to customers over the weekend, inviting them to shop on the site on Monday.
“To celebrate Flipkart’s journey, we are going to have a sale to end all sales. The Big Billion Day Sale is on the 6-10-2014...and the date is no coincidence. The day 6-10 marks the number of the flat we started out from,” they wrote in the message.
Though many customers complained on social media sites that many products were sold out on Flipkart quicker than they could hit “buy” and that Flipkart intentionally took up prices of some products before the sale so as to make its discounts seem bigger, many of these shoppers are likely to have ended up at Amazon or Snapdeal rather than a physical store.
Vidhi Choudhary in New Delhi contributed to this story.