2 min read.Updated: 31 Aug 2016, 08:17 AM ISTMihir Dalal
Online retailers like Amazon India, Flipkart and Snapdeal are struggling to find services that will expand a nascent market that has worryingly declined since the start of the year
Bengaluru: India’s top e-commerce companies have introduced habit-changing offerings to customers in the past three months, but they are still struggling to find the products and services that will expand a nascent market that has worryingly declined since the start of the year.
In late July, online marketplace Amazon India (Amazon Seller Services Pvt Ltd) launched its famed Prime membership programme in more than 100 Indian cities, offering one-day and two-day delivery on lakhs of products for an initial fixed price of ₹ 499.
Three months ago, Flipkart announced a “no-cost" equal monthly instalment (EMI) scheme, under which customers can buy higher-priced products such as premium smartphones, televisions, home appliances and other electronics via monthly instalments without paying interest. Flipkart also launched a Prime-like programme, Flipkart Assured, earlier this month.
All these services are attempts by the online marketplaces to lock in exiting users and get them to spend more. By themselves, these are worthy efforts to bring about a change in the buying habits of Indian shoppers.
If any of these services work on a reasonably large scale, it may offer hope for the entire online retail business, which is desperate to see shoppers buy things for reasons other than deep discounts.
None of these services, however, addresses the core problem facing online retailers: the e-commerce market, in terms of the number of users, simply hasn’t grown so far this year.
Transacting users, those who buy things online on a fairly regular basis, jumped to 50-60 million at the start of 2016 from 12-15 million shoppers at the end of 2013, according to industry executives. The number hasn’t grown so far this year.
The stagnation is reflected in the size of the market. Online retail sales fell to an annualized $12 billion in June, compared with $15 billion in December, according to estimates by research and advisory firm RedSeer Management Consulting.
The market shrank primarily because of lower spending on discounting and advertising by e-commerce firms.
With the festival season coming up, Flipkart, Amazon and Snapdeal will go on an advertising spree and sales are certain to pick up. Extensive advertising and deep discounting will also bring in new users.
But what online retailers really need are the innovative products and services that can attract tens of millions of new users. Advertising by itself may not enough.
The last big innovations that expanded the market in a big way were the launches of high-quality, low-cost smartphones by Motorola and Xiaomi on Flipkart in 2014 as well as the same marketplace’s annual shopping event, Big Billion Day.
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