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Can online discount sales create a lasting impact?

E-commerce firms hope advertising and hype around festive sales will expand the online market significantly

Bangalore/New Delhi: After spending tens of crore rupees on advertising, and in preparing their websites and logistics teams for the expected flood of deal-hunting shoppers, did Flipkart, Amazon and Snapdeal actually benefit from the big sale on Monday?

Yes, said executives at the three online retailers.

Flipkart’s chief executive officer Sachin Bansal acknowledged that the company had made “mistakes" in pricing certain products, but said that the sale was overall a “massive success".

“We expected products to run out very fast, but still the interest was much more than what we expected. There was unprecedented demand and there were mistakes on our side—some customers ended up paying more than what they should have. We’re working to fix this and making sure customers get their money back. But overall we are delighted by the overwhelming response from our customers," Bansal said.

Flipkart, which had been marketing its Big Billion Day sale on Monday for more than 10 days, hit a record of $100 million in gross merchandise value (GMV) in just 10 hours on Monday. GMV is the e-commerce industry jargon for the value of goods sold on the site, but does not account for the discounts e-commerce firms offer or their sales returns.

Flipkart’s errors and its sustained advertising campaign also led shoppers to its rivals Amazon and Snapdeal, reinforcing the belief of many analysts that online shopping is driven mostly by the discounts and there is barely any inherent brand loyalty being created among Indian shoppers by online retailers.

Flipkart’s Bansal was unfazed by this.

“This is the pattern we are seeing since starting 2011 when we first did our TV ad. We aren’t really building Flipkart only, we are building the e-commerce category for the first time. It is like building ATMs for the first time. When banks started creating awareness around it, everybody benefited. We are building the category and when you build a category it helps everybody and Myntra is an example. There was no specific sale there today but they saw a big jump in traffic and orders. So I believe it benefited everyone," Bansal said over the phone.

Flipkart’s rivals Amazon India and Snapdeal have been mocking Flipkart’s Monday sale with campaigns of their own.

Snapdeal, promoted by Jasper Infotech Pvt Ltd, on Monday ran a campaign with the tagline: “For others it’s a big day. For us, today is no different."

Snapdeal CEO Kunal Bahl said the company 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. Over a million Snapdeal apps were downloaded in one day," Bahl said in a statement.

Amazon Seller Services Pvt Ltd, the Indian unit of the world’s largest online retailer, has been running a sale from 4 October to 6 October, calling it the Mission to Mars weekend.

Amazon.in recorded its biggest-ever sales on Monday, an Amazon spokesperson said, without disclosing sales numbers.

To be sure, it isn’t clear whether all the advertising and hype around the festive sales actually will expand the market significantly and whether a large number of new shoppers will start buying online this festive season.

According to estimates by an executive at a large e-commerce firm, a majority of business for e-commerce sites on Monday came from people who were already buying online.

Analysts have said that it is essential for e-commerce firms to dramatically increase the number of online shoppers if these sites want to maintain their explosive sales growth.

Then there’s the e-commerce industry’s preferred measure of metric, GMV.

In this case, Flipkart, Amazon and Snapdeal were offering discounts of up to 90% with Flipkart selling some products for as low as 1. So if a product sold at 1 was originally priced at 1,000, a site can claim to have generated GMV of 1,000.

“These initiatives are mostly to attract customers to start coming in just like the Independence Day sale by Big Bazaar. It is usually to attract the first time customers by offering discounts and for small consumers to move to buying higher ticket size items," said Harish H.V., partner, Grant Thornton India Llp. “These are the hazards of the trade where demand outslips as to what expectations would have been set."

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