The Flip by FlipKart & the Outburst by OLA

Do foreign companies not have the best interest for India and Indians? Should we look towards China for their style of economic growth?

Should we go back to the days of Protectionism? Do we really need support from government to do well or are we capable enough to handle all conflicts and volatility?

In India, while our constitution speaks of becoming a “Socialist” economy, it’s been a while we have been capitalistic in our approach towards business. The first step in this direction was when our Industrial Policy was revamped in 1985, followed by the LPG in 1991. Two and a half decades of working towards liberalizing and globalizing the economy, can it be unraveled by the demands of certain insecure home-grown organisations? I doubt it. And where has it been written or ever been observed that a company that’s protected performs the best? If that were the case, India would have become the best agricultural producer in the world and those working in our agrarian sector would have become the richest.

So what left Sachin and Bhavesh flustered?

Bhavish Agarwal, CEO and Founder, OLA Cabs and Sachin Bansal, Founder and CEO, Flipkart, came together at a recent Carnegie India Global technology Summit to make a nationalistic appeal and urged the Indian Government to design policies which will favour homegrown companies.

In the words of Ola Founder, “What’s happening in both our industries (is that) there is a narrative of innovation that non-Indian companies espouse but the real fight is on capital, not innovation. The markets are being distorted by capital”; 

In the words of Flipkart Founder, “What we need to do is what China did (15 years ago) and tell the world we need your capital, but we don’t need your companies”.

OLA and Flipkart are the harbingers of new generation business, which has propelled the FDI inflow in India, most of which is in the e-commerce industry. The two companies have been growing on the basis of funds that have been pumped in by many multinational funding agencies and venture capitalists. Their business model has failed to bring in profits for their respective investors. Ola posted a loss of Rs 418.25 crore on a net revenue of 754.87 crore for 2014-15. Flipkart posted a loss of Rs 1,932 crore on an estimated net revenue of 1,200 crore for the same period.

VCs have started questioning the business model and stability of these companies. Frankly, the two companies are facing severe problems in logging faster growth rates because of the presence of Amazon and Uber. Traditional businesses often with a gestation period of 3 to 5 years are able to turnaround their business with profits and an IPO plan. Unfortunately these two companies are still unable to strengthen their foothold in their respective businesses. That has left them gasping for breath and crying out for protection. I think they know they will fail if they do not push the envelope! Predatory pricing has never really helped any company win the battle, and these two will have to come up with a better strategy.

Let’s hope that they pull up their socks and, just for the fact that they are Indian companies, they will be able to turnaround their business and chart a historic win atleast in India. They need to learn from a Patanjali which is beating MNCs in India hollow!

By: 

Ms. Monica Mor,

Sr. Faculty, INLEAD

The Great Indian E-commerce Festival & the Snapdeal saga

The Great Indian Festival ‘October 2016 – what a huge success it was! Flipkart clocked sales of 15.5 million units while Amazon clocked 15 million units. In value this converts to Rs. 3000 crores worth of sales for Flipkart in the 5-day Great Indian Festival from the 1^st to the 6^th of October, 2016. There are more sales lined up all the way till Diwali. While Flipkart focused on big ticket items, especially electronics, Amazon focused on acquiring new consumers. Amazon Prime whose subscription can be bought at Rs. 499 was a huge gainer during this time. The success has left both the e-commerce players heady & happy and they have drafted aggressive plans in terms of funds infusion and promotional expenditure.

A question for you reader at this point… Did you realize that I have only been talking about Amazon and Flipkart? Have you noticed the absence of ‘Snapdeal’ in the e-commerce conversations these days? Where is this third biggest player in the Indian online retailing landscape?

Let’s find out more about the missing  Snapdeal…

It was only a year ago when Kunal Bahl, CEO, Snapdeal had boasted that his company would overtake Flipkart in sales. The company has since suffered and now lags way behind its two main rivals Flipkart & Amazon. Clearly a lot went downhill, especially with their deep discount strategy of early 2015. They never really acquired regular customers, and only got the floating ones who wanted to enjoy the discounts. It proved to be rather untenable for Snapdeal. This was followed by their brand ambassador, Aamir Khan’s “intolerance” remark. While the company did not renew his contract as their brand ambassador, many people post remark-controversy uninstalled Snapdeal apps. Then again Amazon stole the e-commerce thunder with better quality, service delivery and response to customer issues. Statistically, more people were found to be downloading Amazon app than any other in the first quarter of 2016. As on March 2016, Flipkart’s market share in the e-commerce space is 37%, down from 2015’s 43%; Amazon’s market share is 24%, up from 2015’s 14%; while Snapdeal’s market share is 14% down from 2015’s 19%. (Economic Times, 6^th October 2016)

Brand Rejuvenation

Will a brand makeover pump up the game for Snapdeal? Well, the CEO thinks so. About Rs. 200 crores will be spent all the way till Dec 2016 to promote Sanpdeal’s new look. In a brand rebuilding exercise, on Sept 10^th the company unveiled its new logo and a new brand identity “Unbox Zindagi”. The company wants to focus on the moments that an e-commerce customer experiences. They could be any; from website browsing to making the purchase to receiving the package to opening the box. The branding team at Snapdeal realized that the moment when the customer opens the box is most magical.

This shift away from just low prices, faster delivery and sales, to appreciating the customer’s aspirations should hopefully rejuvenate the brand and help position it better in their minds. Snapdeal insists that the rebranding is working, despite mixed response to their new campaign. And with many new distribution centers in their kitty, the company has claimed to have regained its mojo, bit by bit. As evidence they claim to have clocked their highest single day sale ever on the 2^nd of October, 2016, shipping 1.67 million products in just 16 hours. Their website traffic has also risen by 20% and their conversion rate is up by 40% as compared to previous year.

It seems the Unbox Zindagi moment is working!!

So, Let the sales begin and let’s see if Snapdeal jumps into the fast moving e-commerce bandwagon once again.

-Ms. Monica Mor, Sr. Faculty, INLEAD