ShopClues plans quiet Diwali in profits push
3 min read 26 Sep 2016, 11:48 PM ISTE-tailer to stay away from price wars, slashes marketing spend for this festive season
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New Delhi: As the large e-commerce firms get ready for a fierce price war this festival season, smaller peer ShopClues is planning a quiet Diwali to reduce cash burn and focus on profitability.
Gurgaon-based ShopClues is targeting a 100% jump in sales for the quarter ending December because of the festival season on the back of discounts and offers provided by sellers.
The company had achieved its target of Rs1,500 crore in sales for the corresponding quarter last year, a 10-fold increase compared with festival sales in 2014.
It will spend Rs1-2 crore towards helping sellers advertise and offer cheaper credit, said Ganesh Balakrishnan, assistant vice-president, merchant services, ShopClues.
Declining to disclose the company’s overall spend on marketing for this festive season, co-founder and chief business officer Radhika Aggarwal said that in a move towards profitability this year, the company has slashed the total marketing spend compared to last year.
“Our digital marketing and television commercials (that go live on Monday) are all focused to tell the consumers that they can get a lot more (products) in a lot less (money spent)," she added.
Almost a 15-20% of the total market spend on Diwali campaign is allocated towards the sellers’ initiative. “Our success lies in (the) merchants’ success. That’s why they remain a very important part of our campaign," said Aggarwal.
CluesNetwork Pvt. Ltd, which operates ShopClues, will help sellers access to credit at a reduced rate of 11.4% through its 18 lending partners such as State Bank of India, ICICI Bank Ltd, Capital Float, Indifi Technologies and FlexiLoans.
The company expects half of its 5 lakh merchants to service orders this Diwali, said Balakrishnan.
ShopClues normally spends Rs20-50 lakh per month on merchant initiatives, with close to 1 lakh merchants servicing orders on a fortnightly basis.
The company, on an average, adds 20,000 new sellers on its platform per month.
For any seller to market its product, ShopClues has created various seller services to increase visibility such as AdZones, Business Guru and Store Manager, some of which are paid services.
These services could charge between Rs1,000 per week to advertise to Rs1,500 per month for a merchant to subscribe to professional help for strategizing and managing the business.
“Out of the top 10% merchants that have paid for such seller services, those who sell apparel have seen about 20-25% growth in sales," said Balakrishnan.
As part of its Diwali campaign, the company is offering these paid services to sellers at a 30-50% discount, said Balakrishnan.
The two-month campaign, which will end on 30 October, however, will see the financial assistance at reduced rates that could be extended till the end of the year, said Balakrishnan. This is in line with its plan to achieve the target of disbursing Rs200 crore in loans, a two-fold jump from previous year’s Rs100 crore that was disbursed to 1,200 sellers.
Until last week, about Rs24 crore loans had been disbursed to sellers.
ShopClues, which in January raised close to $100 million largely from sovereign wealth fund GIC Pte Ltd of Singapore, claims to have 190 million monthly visitors, Mint reported in August. Other investors backing it include Tiger Global Management Llc, Nexus Venture Partners and Helion Ventures.
Owing to the festival season, gross sales at domestic e-commerce companies in October could touch $1.5-1.8 billion, according to a report by RedSeer Consulting, a research and consulting firm.
During last year’s festival sales, daily gross sales at e-commerce firms rose four times to $144 million, driven by a jump in average order value, from $33 on a usual business day to $48 during the festival season.
The country’s largest e-commerce companies—Flipkart Ltd, Snapdeal (Jasper Infotech Pvt. Ltd) and Amazon Ltd (Amazon Seller Services Pvt. Ltd)—are aggressively gearing up for festive sales in October, considering Flipkart and Snapdeal have announced the Big Billion Day and Unbox Diwali sales respectively during 2-6 October, while Amazon will host the Great Indian Festival during 1- 5 October.
While Snapdeal is reportedly planning to spend around Rs200 crore on its Diwali campaign, figures for Amazon and Flipkart are yet to be disclosed.
In preparation of the sale, Amazon India has expanded its product selection by three times to 80 million, added thousands of new sellers, built warehousing space and grown its offline shopping initiative. Meanwhile, Flipkart has opened its second warehouse in Uttar Pradesh.
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